Posted on Apr 1, 2020

The U.S. government recently passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help businesses, families, and individuals make ends meet during the coronavirus crisis. The bill allocated $350 billion specifically to assist small businesses, helping them maintain employees and giving them capital to keep things running.

The emergency loans provision of the CARES Act, also known as the Paycheck Protection Program, lets small businesses borrow as much as $10 million with an interest rate no higher than 4%. These loans, backed by the Small Business Administration (SBA), can be forgiven as long as your company meets certain conditions, including maintaining or restoring your average payroll. This means that, with the right planning, your loan can effectively be a grant.

While there are many potential benefits to getting one of these new loans, how does a small business actually go about applying for one? Thankfully, the U.S. Chamber of Commerce has developed a new step-by-step guide that explains this in detail.

Click here to read the U.S. Chamber of Commerce’s Coronavirus Emergency Loan Guide for small businesses.

This guide explains which companies are eligible for these new loans, what lenders will be looking for from your company, how much you can borrow, how to have the loan forgiven and more.

How does the program work?

Paycheck Protection loans will come from private banks. Currently, the SBA guarantees small business loans that are given out by a network of more than 800 lenders across the U.S. The Paycheck Protection Program creates a type of emergency loan that can be forgiven when used to maintain payroll through June and expands the network beyond SBA so that more banks, credit unions and lenders can issue those loans. The basic purpose is to incentivize small businesses to not lay off workers and to rehire laid-off workers that lost jobs due to COVID-19 disruptions.

What types of businesses are eligible?

The Paycheck Protection Program offers loans for small businesses with fewer than 500 employees, select types of businesses with fewer than 1,500 employees, 501(c)(3) non-profits with fewer than 500 workers and some 501(c)(19) veteran organizations. Additionally, the self-employed, sole proprietors, and freelance and gig economy workers are also eligible to apply. Businesses, even without a personal guarantee or collateral, can get a loan as long as they were operational on February 15, 2020.

How big of a loan can I get and what are the terms?

The maximum loan amount under the Paycheck Protection Act is $10 million, with an interest rate no higher than 4%. No personal guarantee or collateral is required for the loan. The lenders are expected to defer fees, principal and interest for no less than six months and no more than one year.

Can these loans be forgiven?

Yes, small businesses that take out these loans can get some or all of their loans forgiven. Generally speaking, as long as employers continue paying employees at normal levels during the eight weeks following the origination of the loan, then the amount they spent on payroll costs (excluding costs for any compensation above $100,000 annually), mortgage interest, rent payments and utility payments can be combined and that portion of the loan will be forgiven.

How do I get a Paycheck Protection Loan?

Banks are still getting the program up and running so check with your local bank to see if they have the program in place. Banks that are already approved SBA lenders may be quicker to get the loan program in place. The Treasury Department has released more details on the loans here. You can also see the loan application here. You will apply for the loan at your bank.

We are Here to Help!

If you have questions regarding the PPP loan application process, please give your CJ contact a call.

Information contained in this email was primarily sourced from articles written by Sean Ludwig, Contributor and originally published on the U.S. Chamber of Commerce Website.

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