The Paycheck Protection Program (PPP), a fund of $349 billion in forgivable loans for small businesses that was created during the passage of the U.S. Government’s $2 trillion stimulus bill, begins accepting applications on April 3. Small businesses with 500 or fewer employees are eligible to apply.
The funds are provided through loans, covering up to two months of average payroll costs, that will be fully forgiven when used for payroll costs, interest on mortgages, rent and utilities. Loan payments will also be deferred for six months and no collateral or personal guarantees are required. Interest rates on the loans are set at a 0.50% fixed rate.
However, there are some requirements that must be met in order to have a loan forgiven. Due to likely high enrollment in the program, at least 75% of the forgiven amount must be used for payroll. Loan forgiveness is also based on maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines or if salaries and wages decrease.
Starting April 3, small businesses and sole proprietorships can apply for a PPP loan. Starting April 10, independent contractors and self-employed individuals can apply. Click here to download a PPP application form.
Applications can be submitted through any existing SBA 7(a) lender or federally insured depository institution, credit union or Farm Credit System that is participating in the program. Businesses should consult with their local lender as to whether it is participating. Click here to see the SBA’s list of lenders.