The Paycheck Protection Program
Emailed on April 3rd 2020 in The Friday Forward
Today's the first day for small business to apply for the new Small Business Association's Payroll Protection Program. As you might expect, rolling out the largest stimulus package in the history of the US in 2 weeks is not going smoothly.
Banks like JPMorgan Chase emailed customers on Thursday evening stating that the bank "will most likely not be able to start accepting applications on Friday, April 3rd as we had hoped."
But that doesn't mean you shouldn't be prepared. Last night the final borrower application form was published and can be found here.
Here's the skinny:
How can I apply? Businesses can apply through any existing SBA 7(a) lender at more than 1,800 banks that already offer Small Business Administration loans, but the program is also expanding to other traditional banks, credit unions, and Farm Credit System institutions.
Where should I apply? However, Dorsey & Whitney's Logsdon recommends that businesses work with banks that they already have a relationship with - THIS IS KEY - from what we've seen at Malartu, banks are prioritizing applications from companies they have pre-existing relationships with (like outstanding loans).
When can I apply? Small business can apply today (April 3rd). Contractors can apply starting April 10th.
Are there credit requirements? There are currently no credit requirements
What is needed to apply? Small businesses will need to provide documentation (including payroll documentation) "verifying the number of full-time equivalent employees on payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight week period following this loan will be provided to the lender."
What if I have existing debt? Outstanding loans have no bearing on your PPP loan.
How much can I draw down? Small businesses can borrow up to 2.5 times their average monthly payroll from the previous year. So, take last year's annual payroll cost, divide by 12, multiply by 2.5X.
What can I use the money for? Small businesses can use the loan for payroll costs and benefits, including vacation, parental, family, medical and sick leave, health and retirement benefits, and state and local taxes.
What are the terms? The SBA notes the loan has a maturity of 2 years and a fixed interest rate of 1% (changed from 0.5% on Thursday). Loan payments will be deferred for six months.
According to the SBA, the Payroll Protection Program loan will be "fully forgiven" if the money is used as outlined.
What if I've already made layoffs? According to the SBA, small businesses have "until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020" for forgiveness of the loan.
Reply here if you have any questions, we will help however we can.