Paycheck Protection Program

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After funding having ran out in about two weeks, additional funding was approved by Congress on April 23, 2020. Renewed funding revises the total set aside adding $322 billion to the initial $350 billion already allocated.

Eligibility, calculations, terms, and forgiveness remain the same for this program, which is modeled after the existing SBA 7(a) loan program many businesses already know.

How does it work?

Under the traditional 7(a) program, the SBA guarantees small business loans that are given out by a network of more than 800 lenders across the U.S.

The Paycheck Protection Program creates an emergency loan that can be at least partially forgiven when used to maintain payroll through June. It also expands the network beyond SBA so that more banks, credit unions, and certified alternative lenders can issue those loans. The main idea is to create an incentive for small businesses to not lay off workers and to rehire workers that lost their jobs due to the impact of COVID-19.

Is my business eligible?

You and your business are eligible if you are:

  • A Small business & 501(c)(3)’s with fewer than 500 employees or otherwise meeting the SBA’s size standards.
  • An Individual operating as a Sole Proprietor
  • An Individual operating as an Independent Contractor
  • A Self-employed Individual who regularly carry on any trade or business, including freelance and gig economy workers
  • Tribal businesses concerns that meet SBA size standards

Businesses must have been operational on February 15, 2020.

What are the loan details?

  • Maximum loan amount: $10 million
  • Interest rate: up to 1% (revised 4/2/2020)
  • Terms: 2 years
  • No loan fees, no prepayment fee (SBA to establish application fee caps for lenders)

No personal guarantee or collateral is required for the loan. Lenders are expected to defer fees, principal, and interest for no less than six months and no more than one year.

What is the Loan Forgiveness about?

Based on what we know from the bill, a portion or the entirety of the loan can be forgiven as long as employers continue covering their normal levels of payroll, excluding compensation above $100,000 annually.

The eligible forgivable amount would equal the amount of money spent during the 8-weeks from the origination of the loan on: payroll costs (excluding costs for any compensation above $100,000 annually), mortgage interest, rent payments, and utility payments combined.

How do I apply?

Gather the necessary documents, including tax returns, financial statements, payroll details, and your 1099 if you are an independent contractor. We can assist you in understanding what to put together so you are ready to go. Then, reach out to one of the Active SBA Lenders in Connecticut to start your application. Applications originally opened April 3 for small businesses and April 10 to independent contractors.

Banks are still taking applications while waiting for the SBA to enable the submission portal once the new funding bill is signed. We suggest you reach out to your local bank immediately if you have not applied yet, as we expect the funding to go quickly.

We are still looking to understand how applying for the PPP loan may affect independent contractors who are now also eligible to apply for unemployment benefits under the CARES Act.

Which Loan Should I Apply For?

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