CARES Act includes Paycheck Protection Program
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) established a new $349 billion Paycheck Protection Program, which will provide much-needed relief to millions of small businesses so they can sustain their businesses and keep their workers employed.
“This unprecedented public-private partnership is going to assist small businesses with accessing capital quickly. Our goal is to position lenders as the single point-of-contact for small businesses – the application, loan processing, and disbursement of funds will all be administered at the community level,” said Administrator Jovita Carranza. “Speed is the operative word; applications for the emergency capital can begin as early as this week, with lenders using their own systems and processes to make these loans. We remain committed to supporting our nation’s more than 30 million small businesses and their employees, so that they can continue to be the fuel for our nation’s economic engine.”
“This legislation provides small business job retention loans to provide eight weeks of payroll and certain overhead to keep workers employed,” said Secretary Mnuchin. “Treasury and the Small Business Administration expect to have this program up and running by April 3rd so that businesses can go to a participating SBA 7(a) lender, bank, or credit union, apply for a loan, and be approved on the same day. The loans will be forgiven as long as the funds are used to keep employees on the payroll and for certain other expenses.”
The new loan program will help small businesses with their payroll and other business operating expenses. It will provide critical capital to businesses without collateral requirements, personal guarantees, or SBA fees – all with a 100% guarantee from SBA. All loan payments will be deferred for six months. Most importantly, the SBA will forgive the portion of the loan proceeds that are used to cover the first eight weeks of payroll costs, rent, utilities, and mortgage interest.
Read the full press release here.
Program Overview
· The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.
· SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
· The Paycheck Protection Program will be available through June 30, 2020.
· All loan terms will be the same for everyone.
Who Can Apply
· This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19.
· Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
· Small businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. This means each store location could be eligible.
How to Apply
· You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program.
· You should consult with your local lender as to whether it is participating in the program.
· Lenders may begin processing loan applications as soon as April 3, 2020.
· Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply.
· SBA encourages you to apply quickly because there is a funding cap.
Loan Details and Forgiveness
· The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months.
· No collateral or personal guarantees are required.
· Neither the government nor lenders will charge small businesses any fees.
· Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
· This loan has a maturity of 2 years and an interest rate of 0.5%.
· If you wish to begin preparing your application, you can download a sample form to see the information that will be requested from you.
· You will need to provide your lender with payroll documentation.
Helpful Documents
