The Paycheck Protection Program Explained For Small Business
Lubbock National Bank says they’re ready to provide new stimulus loans to small businesses as part of recently passed legislation. Expected to be signed into law by President Trump this week, the Coronavirus Aid, Relief and Economic Security Act (CARES) has a new loan program designed to help small businesses retain their workforce during the Coronavirus pandemic.
According to the bill, businesses with 500 or fewer employees can apply for the Paycheck Protection Program. Some companies with fewer than 1,500 employees may also qualify, as will certain 501(c)(3) and 501(c)(19) organizations.
Loans under the Paycheck Protection Program can be given up to $10 million dollars or 2.5 times the average monthly cost of payroll over the last year, whichever is less. Payroll in this case includes the wages of employees making under $100,000, expenses for paid sick leave, healthcare costs and other benefits.
The loan term is up to 10 years with a maximum interest rate of 4%. No personal guarantee or collateral is required to qualify for the loan and payments can be deferred up to 6 to 12 months.
According to Forbes.com, all or part of the loan may also be forgiven if it is used for covering immediate expenses like rent, utilities, health insurance premiums, and payroll costs. However, the business must maintain the same average number of employees for the first 8-week period of the loan as they employed between the dates of Feb. 15, 2019 and June 30, 2019, or from Jan. 1, 2020 and Feb. 15th, 2020.
If you have already laid off employees due to the economic downturn, there is an exception. You may still qualify for loan forgiveness if you rehire employees that were recently laid off and restore any decreases in the wages or salaries for current employees by June 30, 2020.
CARES has allocated $350 billion to the Paycheck Protection Program and it’s only available through local lenders like Lubbock National Bank. Senior Vice President, Paul Dannevik, says all that companies need to get started are three years of financials, a payroll list, rent expenses, and utility bills.