The U.S. Small Business Administration is opening their Paycheck Protection Program (“PPP“) to applications beginning April 3, 2020. This program allows employers to receive up to $10 million in low interest loans to cover the cost of two months of payroll, mortgage interest, rent, utilities, and other expenses during this time of economic uncertainty caused by the coronavirus.
Eligibility: To qualify for a PPP loan, employers must have 500 or fewer employees (except certain industries may have more if they meet the SBA’s size standards). In addition to the size requirement, business owners must certify to certain facts appearing in the attached application, such as stating that “current economic uncertainty makes this loan requested necessary to support the ongoing operations of the Applicant”.
Loan Terms and Limitations: The interest rate is fixed at 0.5%, payments are deferred for 6 months, the loan is due in 2 years, and no collateral or personal guarantee is required. Employers are limited to one loan. Total loan amounts are capped at $10 million per employer and payroll costs are capped at $100,000 per employee.
Qualified Expenses: Qualified expenses include:
- Payroll costs, including salary, wages, family/medical/sick leave and other employee benefits, insurance premiums, state/local taxes assessed on compensation, and more.
- Interest on mortgage obligations incurred before February 15, 2020.
- Rent if the lease was in force before February 15, 2020.
- Utilities if the service began before February 15, 2020.
Loan Forgiveness: Up to 100% of the loan will be forgiven as long as it is used for the qualified expenses outlined above. Forgiveness will be reduced if the full-time headcount declines, if salaries or wages decrease, or if more than 25% of the loan amount is used for non-payroll costs.
Application Instructions: Applications open on April 3, 2020 for small businesses and sole proprietorships. Applications open April 10, 2020 for independent contractors and self-employed individuals. Applications may be submitted until June 30, 2020. The application is available online at the U.S. Department of Treasury website: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf
If you have additional questions about the Paycheck Protection Program loans or need help applying for one, please contact one of our offices to schedule a telephonic conference with one of our attorneys.
HaasCaywood PC continues to monitor the numerous executive orders, notices, and guidelines being issued by our state and federal officials related to COVID-19 and are prepared to assist and advise you and your business in relation to the same.
Other HaasCaywood PC COVID-19 Related Blogs
- Remote Notarization and Witnessing for Estate Planning, Real Estate Closings, and Other Transactions
- “Paycheck Protection Program” Loans for Small Businesses
- Michigan Employer Guidelines under Governor Whitmer’s “Stay at Home” Order
- Expanding Paid Family and Medical Leave Due to COVID-19: What Employers and Employees Need to Know
- Disaster Loan Assistance from the U.S. Small Business Administration
- Local Court Closures Due to COVID-19
Prepared on April 7, 2020 by HaasCaywood PC
 SBA is also waiving their previous affiliation and “credit elsewhere” standards to increase eligibility, so employers affiliated with the SBA and those who could find credit elsewhere are not disqualified.
 Payroll costs are calculated by taking the total cost of payroll, benefits, and state/federal tax from 2019, multiplying it by 6 to find the average amount spent over 2 months, and adding 25%. For example, an employer with $100,000 in total payroll costs would spend an average of $16,667 over two months. After adding 25% ($4,167), the employer can receive up to $20,834 for payroll costs.