Paycheck Protection Program: What You Need to Know
The Coronavirus Aid, Relief, and Economic Security Act, more commonly referred to as the CARES Act, is a federal law to alleviate the negative impact on the economy caused by the COVID-19 pandemic. A key measure from the CARES Act is the Paycheck Protection Program, a loan program designed to provide financial assistance to small businesses. On June 5, 2020, President Trump signed into law the Paycheck Protection Program Flexibility Act of 2020, which amends the Paycheck Protection Program. Learn more about the Paycheck Protection Program with these answers to frequently asked questions:
● How much funding will be awarded under the Paycheck Protection Program and what are the repayment requirements?
The loan amount is determined by a business's average monthly payroll costs. Under the Paycheck Protection Program, business owners can borrow up to 2.5 times their average monthly payroll costs, not to exceed $10 million. Loan forgiveness is available if a business spends the loan money to restore its employee levels within 24 weeks of receiving it. Any loan amounts that are not forgiven will need to be repaid within five years at a 1% interest rate.
● What businesses qualify to receive assistance from the Paycheck Protection Program?
U.S.-based businesses with fewer than 500 employees, and sole proprietors, independent contractors, and self-employed individuals are eligible to receive financial assistance under the Paycheck Protection Program. They must have been affected by the COVID-19 pandemic and show a need for the money to continue their normal operations.
● What expenses are allowed to be paid using money from the Paycheck Protection Program?
Under the amended Paycheck Protection Program Flexibility Act, borrowers are required to spend 60% of their loan amount on payroll, which includes salary, paid time off, and other benefits. The remaining 40% can be used for mortgage interest, rent, or utility payments.
● How do I apply to receive a loan from the Paycheck Protection Program?
You can apply for a Paycheck Protection Program loan through any of the 1,800 participating lenders approved by the Small Business Administration (SBA). Applications must be submitted by June 30, 2020. Find an approved Paycheck Protection Program lender here.
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