If you are a small business owner, during this pandemic, you might be struggling not only to stay open, but to pay and retain your employees. Enter the Paycheck Protection Program.
You aren’t alone: Across the U.S. thousands of small business owners are struggling with the COVID-19 crisis and the economic fallout. The federal government, however, is working on a plan.
The Paycheck Protection program offers federal relief for small business owners in the way of forgivable loans that can be used during the coronavirus crisis. It is expected to provide billions in aid dollars and is now in its second round.
In this second round, smaller businesses can receive funds and is aimed at keeping these businesses solvent until the economy recovers.
Here’s what small business owners need to know. Read on:
Do I qualify for the Paycheck Protection Program?
Under the Paycheck Protection Program, businesses with fewer than 500 employees are eligible for a loan. Non-profit organizations are eligible as well. However, only one loan will be given per small business and you need a taxpayer identification number to even apply.
If you are an independent contractor or sole proprietor, you don’t qualify (however, there are other loans available if this is you!).
How much money?
There is a formula for small business owners and it is basically a loan 2 ½ times the size of your monthly payroll costs – with a cap of $10 million. And if you have employees who make more than $100,000 a year, you’ll have to subtract the overage. This means, you can only include an employee’s salary up to $100,000 in the payroll calculation.
If you have employees who live outside the U.S., they don’t qualify in your payroll costs.
How can I spend it?
Basically, the money is to be used to pay your employees and make business expenses during the pandemic. The loans have a 1% interest rate and there’s no collateral or guarantor required. You’ll have to pay back the loan in two years and you can defer payments six months but you’ll have to pay interest.
There are also provisions for the loans to be forgiven if small business owners meet certain requirements, like paying workers for eight weeks after getting the loan and using the loan for the specific costs. If you cut your employees’ salaries, for example, you might have to repay the loan.
Application process
If you want to apply, you can through a Small Business Administration lender or any FDIC insured financial institution. Check out the list here. https://www.sba.gov/
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