Due to the Coronavirus impact on the country, the Small Business Administration (SBA) issued the Coronavirus Aid, Relief, and Economic Security (the CARES Act). This is a piece of federal legislation that provides approximately $2 trillion to help the economic crisis that is affecting people, families, and businesses. Part of the relief package includes the Paycheck Protection Program (PPP) that will provide $349 billion in small business loans.
What is PPP?
Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive PPP loans through existing SBA lenders. Independent contractors and self-employed individuals are eligible as well and can begin applying on April 10, 2020. This exists to cover their payroll and certain other expenses.
What is the Maximum Amount I Can Borrow?
The amount a small business can borrow is 250 percent of their average monthly payroll expenses, up to $10 million. This amount is intended to cover eight weeks of payroll and any other amounts for making payments towards debt obligations. It can be applied to any period between February 15, 2020 and June 30, 2020.
How Can I Use the Money So That the Loan Will be Forgiven?
The amount of principal that can be forgiven from the loan is equal to the sum of expenses for the following:
- Payroll, including employee’s salaries up to an annual rate of pay of $100,000, hourly wages and cash tips, paid sick or medical leave, and group health insurance premiums.
- Existing interest payments on mortgages
- Rent payments
- Utility service agreements
Businesses are free to use PPP loans for other business-related expenses, such as inventory. However, if they do, the loan will not be forgiven. Loans will be forgiven at the end of the eight week period after they take out the loan. If the full principal is forgiven, the borrower is not responsible for the interest accrued during the period. The remainder of a loan that is not forgiven will be paid according to terms set by the business and the lender.
When is the Deadline to Apply?
While the deadline to apply for the PPP loan is June 30, 2020, the PPP Guidance encourages businesses to apply as soon as possible. This is because concerns are high that demand will cause the PPP to reach its funding capacity before the designated date.
Contact our Firm
Marc N. Needelman is an experienced attorney working throughout the state of Connecticut. If you need an attorney who is ready to fight for the financial compensation you deserve, please do not hesitate to contact us to set up a free initial consultation. Our firm deals with matters relating to real estate, personal injury, criminal defense, estate planning, and more.