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SBA’s Paycheck Protection Program for small businesses launches

April 4th, 2020 / By: / COVID-19, Industry News

The U.S. Small Business Administration (SBA) Administrator Jovita Carranza launched the Paycheck Protection Program on April 3, 2020, a $349 billion emergency loan program created last week with the President’s signing of the Coronavirus Aid, Relief, and Economic Security Act (CARES). The program provides forgivable loans of up to $10 million to small businesses left financially distressed by the Coronavirus (COVID-19) pandemic. The loans, which will be administered at the local level by a national network of banks and credit unions, are designed to maintain the viability of millions of small businesses struggling to meet payroll and day-to-day operating expenses.

“These loans will bring immediate economic relief and eight weeks of financial certainty to millions of small businesses and their employees,” SBA Administrator Carranza said. “We urge every struggling small business to take advantage of this unprecedented federal resource—their viability is critically important to their employees, their community, and the country.”

The loans, which are 100 percent backed by SBA, are being provided to small businesses without collateral requirements, personal guarantees, SBA fees, or credit elsewhere tests. Those eligible for the program include small businesses, certain nonprofits, veterans’ organizations, self-employed individuals, independent contractors and other businesses meeting size standards based on their North American Industry Classification System code.

Paycheck Protection Program details

The Paycheck Protection Program’s maximum loan amount is $10 million with a fixed 1 percent interest rate and maturity of two years. The loans are available to cover up to eight weeks of average monthly payroll (based on 2019 figures) plus 25 percent, and payments are deferred for six months (interest does accrue). The SBA will forgive the portion of loan proceeds used for payroll costs and other designated operating expenses for up to eight weeks, provided at least 75 percent of loan proceeds are used for payroll costs. Eligible expenses for the eight-week forgiveness include:

  • Payroll costs (excluding the prorated portion of any compensation above $100,000 per year for any person. Payroll costs include salary, commissions, tips; certain employee benefits including sick leave and health care premiums, and state and local taxes;
  • Mortgage interest (not prepayment or principal payments) and rent payments on mortgages and leases in existence after February 15, 2020;
  • Utilities such as electricity, gas, water, transportation, phone and internet access for services that began before February 15, 2020; and
  • Additional wages paid to tipped employees.

For additional resources about protecting your business, employees and customers, visit www.SBA.gov/Coronavirus.