Paycheck Protection Program Loan Guarantee
The CARES Act’s Paycheck Protection Program Loan Guarantee offers another source of help – SBA backed small-business loans through local lenders.
- Available to small businesses with fewer than 500 employees as well as select types of business with fewer than 1,500 employees (in operation before February 15, 2020)
- Self-employed, sole proprietors, freelance and gig economy workers may also apply (in operation before February 15, 2020)
- Loans are available up to a maximum of the lesser of $2 million, or 2.5 times the average monthly payroll costs – including wages for employees making under $100,000, and/or expenses for paid sick leave, healthcare and other benefits – during the 1-year period before the date on which the loan was made.
- Maximum interest rate .05%
- Loan term up to 2 years
- No personal guarantee or collateral required
- Payments deferred for six to 12 months Part of this loan may be forgiven and not counted as income to you, if spent during the first eight weeks on operating expenses.
Loans will be forgiven when the proceeds are used for any of these costs:
- Payroll costs, excluding prorated amounts for individuals with compensation greater than $100,000
- Rent related to a lease in force (before February 15, 2020)
- Utilities – electricity, gas, water, transportation, telephone, or internet access expenses for services which began before February 15, 2020
- Group health insurance premiums and other healthcare costs.
For loan amounts to be forgiven, you must maintain the same average number of employees for the first eight-week period beginning on the origination date of the loan as you did from February 15, 2019 – June 30, 2019 or from January 1, 2020 until February 15, 2020.
If you don’t meet this requirement, the amount forgiven is reduced. You incur additional reductions if you cut compensation for employees who make under $100,000 by more than 25%, as compared to the most recent quarter.
Apply for the Paycheck Protection Loan directly through your local lending institution and check here for a list of FAQs. As a business owner, you must personally certify that your company qualifies as a small business.