Overview of the Paycheck Protection Program

The Paycheck Protection Protection program is part of the emergency stimulus passed by Congress under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). This program is specifically targeted at Small Businesses to continue functioning without compromising on their workforce. The key provision of the program is the setting aside of $349 billion in funds for Small Business Association (SBA) loans to qualifying businesses.

What are the payroll expenses for which PPP funds can be utilized?
Here is the list of payroll expenses that can be covered under PPP funds

• State and local taxes
• Health and Retirement benefits
• Employees salary, hourly wages, and cash tips
• Group health insurance premiums and retirement benefits

How do I apply for the Paycheck Protection Program?
To apply for a PPP loan, you can approach any lending institution that is an approved participant of the program through the existing SBA 7(a) lending program. In addition to this, you can apply for a PPP loan from any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating in the program.

When is the application deadline date for a Paycheck Protection Program loan?
You can apply for a PPP loan from April 3, 2020, onwards until June 30, 2020- the application deadline date.

Who is eligible for a PPP loan?
The PPP program is exclusive to small businesses whose workforce size is 500 or lesser than that. Or, the workforce size should be on the applicable standard for the industry as recommended by the SBA.

Here is the list of eligible applicants:

• 501(c)(3) Nonprofits
• Sole Proprietorships
• Self-Employed Individuals
• Independent Contractors
• 501(c)(19) Veteran Organizations

When will I be eligible for forgiveness on a Paycheck Protection Program loan?
The loan you receive is fully forgiven only when the organization abides by certain parameters. According to which, the funds should have been used for

• Payroll Costs- includes employee salaries, hourly wages, cash tips, health insurance premiums and paid sick or medical leave
• Paying interest on mortgages, rent payments, leases, and utility service agreements

In addition to those stated above, forgiveness is also based on employer maintaining or quickly rehiring employees and maintaining the salary levels. If the employer lay off employees, the forgiveness amount is proportionately reduced by the percent decrease in the number of employees laid off in comparison with the previous year’s headcount. 

Is there any limit on the borrowing amount?
Yes. The maximum amount a small business can apply would be 250 percent of its average payroll expenses incurred during the 1-year period, up to a total of $10 million. With this loan amount, only eight weeks of payroll expenses and additional amounts needed to make a payment towards debt and other obligations are covered. It’s the borrower’s prerogative to choose any eight-work period between February 15, 2020, and June 30, 2020.

Should I pay interest for any unforgiven loan amount? What are the terms attached to it?
Any balance amount post the forgiveness reduction is guaranteed by the SBA. This loan will have a maturity term of 10 years. And, this is from the date of application of loan forgiveness, and the interest rate is capped at 4%. The borrower need not pay any loan fees, and the SBA has waived collateral and personal guarantee requirements.   loans will have a 10-year term,