WASHINGTON (WDTN) – Small businesses and workers could see some relief as the U.S. Small Business Administration launches its Paycheck Protection Program.
It is a $349 billion emergency loan program created as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act signed by President Trump last week.
The program provides forgivable loans up to $10 million to small businesses left struggling through the pandemic. The loans will be administered at the local level by banks and credit unions, and are designed to help small businesses trying to meet payroll and daily operating expenses.
The loans are backed 100 percent by the Small Business Administration and are available to small businesses without collateral requirements, personal guarantees, SBA fees, or credit elsewhere. This includes small businesses, certain nonprofits, veteran organizations, self-employed individuals, independent contractors, and other businesses that meet size standards based on the North American Industry Classification System code.
The max loan amount available is $10 million with a fixed 1 percent interest rate and maturity of two years.
Based on 2019 figures, the loans can cover up to eight weeks of average monthly payroll plus 25 percent and payments are deferred for six months, though interest does accrue. The SBA will forgive the portion used for payroll and other designated operating costs for up to eight weeks, provided at least 75 percent of loan proceeds are used for payroll costs.
Eligible expenses 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.
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