The following are the aspects of the Paycheck Protection Plan as we have interpreted in the CARES Act. These are subject to change upon guidance from the SBA and the U.S. government.
Paycheck Protection Program
PAYCHECK PROTECTION PROGRAM
- Loan amount based on 2.5x monthly total payroll expens up to $10,000,000
- Interest rate of 1%
- 2-year full payout loan. Payments deferred for at least 6 months.
- No personal guarantee or collateral required
- Eligible for 100% forgiveness
- Loan proceeds can be used for payroll support including medical leave, costs related to health benefits, employee salaries, mortgage payments, rent, utilities, insurance, and any other debt payments incurred before 2/15/2020
- No prepayment penalties
- SBA Guarantee Fee will be waived
Payroll costs include salaries, wages, tips, payments for sick leave, insurance premiums and state and local taxes assessed on the compensation of employees (limitations for employees earning over $100,000 per year apply).
Borrowers will be eligible to apply for loan forgiveness equal to the amount spent by the borrower during an 8-week period after the loan closing date on payroll costs, interest on mortgages, payments of rent, and utility payments, in each case that were in place before February 15, 2020. The amount forgiven is reduced proportionally by any reduction in employees retained compared to the previous year and by the reduction in pay of any employee beyond 25 percent of the prior year’s compensation (considerations for businesses with employees earning in excess of $100K should be considered)
A borrower can rehire workers who have been laid off from February 15, 2020 through April 1, 2020 without having those layoffs counted against them if rehired by June 30th, 2020. Cancelled indebtedness shall not be included in the borrower’s taxable income for this year.
There are two programs available through the SBA for busineses and non-profits that have been adversely impacted by the COVID-19 Pandemic. One is an Economic Injury Disaster Loan (EIDL) and the other is a Paycheck Protection Program loan (special SBA 7a Loan).
If you’d like to know which program is best for your business we’d be glad to assist. Complete the form below and we’ll reach out to schedule time for a call to walk you through all of the details and answer questions.