Racers, start your engines! $349B of potentially forgivable small business loans become available today under the new SBA Paycheck Protection Program (PPP), and it’s first-come-first serve. What’s troubling is that banks and businesses just got the final playbook last night to determine how the loans will be calculated and forgiven, and questions still remain.
It’s a heck of an opportunity to help businesses keep people on payroll but may see some inevitable mishaps with the volume of small businesses applying. Here are some quick facts about the PPP:
- Available for small businesses and nonprofits with up to 500 employees, self-employed individuals also eligible
- Applications are made at SBA 7(a) loan providing lending institutions
- Available through the earlier of June 30th, 2020 or when funds have been exhausted
- To be used for payroll, interest on certain debt, rent, and utilities
- Interest rate of 1%, 2 year term, with six month payment deferral
- No collateral or personal guarantee required
- Max loan is the lesser of 2.5 x average monthly payroll or $10M
- Potential tax-free loan forgiveness for qualifying costs incurred within first 8 weeks of loan
One caveat with the PPP is that it cannot be taken in conjunction with the new Employee Retention Credit, which is a new refundable tax credit of 50% of up to $10,000 in wages per employee paid by eligible employers impacted by COVID-19. And the new up-to-two-year payroll tax deferral brought by the CARES Act as well cannot be taken either if a businesses has any of its PPP loan forgiven.
If a business doesn’t qualify for the PPP or opts to use the Employee Retention Credit instead, other loan programs may be available.
Stay up to date on the latest via our COVID-19 resource center.
Related: AICPA’s SBA Paycheck Protection Program Resources for CPAs
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