Trying to Get a PPP Loan? Here’s What You Need to Know

Small business owners who are looking for continuing monetary relief from Covid-19 now have an opportunity. The Paycheck Protection Program (PPP) has been reopened, and the deadline to apply for this loan has been extended through August 8, 2020. Since the program was first rolled out, there have been a few changes - read this guide to find out whether you qualify.

What is the Paycheck Protection Program?

The Paycheck Protection Program is a loan designed to help keep small businesses afloat and workers paid or rehired. It was originally introduced as part of the CARES Act and launched in early April, with $350 billion available in funding. After the initial rollout, the PPP ran out of funding in about a two-week period, with a second round opening in late April, which was set to expire on June 30.

However, as of July 4, new legislation was passed to extend the application deadline to August 8, 2020. There is still about $130 billion left in the budget for the program. Currently, there is no discussion in place to extend the program. After August 8, Congress must re-allocate these funds.

How can I apply for the Paycheck Protection Program?

Eligible borrowers (available to small businesses with 500 or fewer employees) are able to apply through “any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating,” according to the Small Business Administration website. A list of available lenders is available here.

What are the terms for the loan? Will I have to pay the loan back?

The original rules of the PPP under the CARES Act have relaxed somewhat as of June 5, under the Paycheck Protection Program Flexibility Act (PPPFA). You can still use the PPP funds for payroll (up to $10 million or 2.5 times your average monthly payroll), benefits, and compensation taxes; mortgage interest, rent and utilities (up to 40% - this originally was 25%).

Businesses have 24 weeks to apply for loan forgiveness (up from 8 weeks in the original bill). As long as the loan is used for the purposes for which it was intended, the loan will be fully forgiven, with at least 60% of the loan being used for payroll. Other loan details, according to the SBA:

PPP loans have an interest rate of 1%.
Loans issued prior to June 5 have a maturity of 2 years. Loans issued after June 5 have a maturity of 5 years.
Loan payments will be deferred for six months.
No collateral or personal guarantees are required.
Neither the government nor lenders will charge small businesses any fees.

Is the PPP the right fit for my business?

If you are considering a Paycheck Protection Program loan to help keep your small business afloat during these times, please contact us at Chatterton & Associates. We are happy to discuss whether this option is the right fit for your needs.

Sincerely,

The Team at Chatterton & Associates