In an effort to help small businesses affected by the Covid 19 outbreak Congress recently passed new laws. While several new programs have been launched, we wanted to make our client’s aware of the new Paycheck Protection Program just enacted. This program may help many small businesses around the country, including many of our clients.
This program is a loan program through the Small Business Administration (SBA); however the program has a loan forgiveness provision, meaning in many cases the loans will not have to be paid back.
When does this start?
Applications can be submitted starting this Friday, April 3, 2020. The process is first come first served, so applying early may be important.
Who does this cover?
The law applies to any small business that has less than 500 employees. Some businesses with over 500 employees may also qualify, depending on the industry they are in and if they meet certain other requirements.
How much can I borrow?
The loan amount will be for 2 1⁄2 months of your payroll costs. Payroll costs will be based on your average payroll, but the payroll cost is capped at $100,000 per year per employee. The overall size of the loan is also capped at $10 Million.
What can you use the proceeds for?
The loan can be used to pay employee payroll, employee benefits including health care insurance costs, rent, mortgage interest and utilities.
What portion of the loan will be forgiven?
The loan will be forgiven if the loan proceeds are used for payroll costs. The loan may also be forgiven if used for other approved expenses, such as rent, but it is anticipated that not more than 25% of loan proceeds used for expenses other than payroll will be forgiven. Also, loans will not be forgiven if your business cuts the number of employees or its payroll.
Where do you apply?
You can apply with any SBA approved lender and most FDIC insured banks. We recommend contacting your existing bank first, as processing at a bank you have a relationship with may be easier and faster.
For your convenience we have attached a sample of the application form for your consideration. (Please note these forms are likely to be updated. Please check with your bank to make sure you have the current version of the form when you apply).
More information is available at the SBA. Click here:
There are also other emergency loan programs available from the SBA. Please contact us if you would like more information on this.
How can we help you?
Please feel free to contact us if you have any questions about this program or if we can provide you with any advice or assistance on any legal questions you may have.
Parker Schwartz, PLLC
Our Attorneys: Jared Parker, Ira Schwartz, Larry Hirsch, Mark Candioto, Susan Swick, Monty Greek, Iva Hirsch, Ned Lee, Paul Cox and Rob Northrop