What You Should Know About The Payroll Protection Program
Recognizing the government response to the coronavirus should not cause more injury and damage than the coronavirus itself, the U.S. Small Business Administration (SBA) is offering loans and grants to small business employers to help them retain their employees. The loans are authorized under the federal Coronavirus Aid, Relief, and Economic Stability Act (CARES Act), signed by President Trump on March 27, 2020. The loans will be available through June 30.
Business Eligibility
Eligible small businesses include any business or nonprofit with 500 or fewer employees, regardless of part or full-time status. While the rules generally preclude eligibility to small businesses affiliated with others by ownership or control, exemptions exist for the hotel and restaurant sectors and certain entities operating as franchises.
Loan Forgiveness
Employers receiving SBA loans can convert them to grants with no repayment obligation if by June 30 they can show they have retained all their employees, even if the employer laid off some temporarily. Also, even if the employer was forced to make permanent layoffs, that does not preclude loan forgiveness. Rather, the employer’s loan obligation is reduced by the percent decrease in the number of employees.
Loan Terms
The loan amount is 2.5 times the employer’s average total monthly payments for payroll costs during the one-year period before the date of the loan, up to a total of $10 million. The employer may not include employees receiving annual compensation in excess of $100,000. The SBA loan terms are favorable to eligible employers with provisions such as the following:
- Loan payments are deferred for a period of six months and up to one year.
- The interest rate is capped at four percent.
- The loan proceeds may be used both for payroll and for other operating costs such as mortgage and rent payments.
- The SBA is not charging loan fees.
- The employer need not show it was unable to obtain credit elsewhere.
For More Information, Contact Us
Payroll Protection Program details continue to evolve from the SBA and U.S. Department of Treasury. We continue to monitor these and all aspects of the Governor’s “Stay Home” order for the long-term protection of our Washington State businesses and their employees. The lawyers at Beresford Booth are prepared to answer any questions about the Payroll Protection Program, how you can apply, and whether accessing these funds is the best option for your business.