As a small business owner, in the last few months, the COVID-19 pandemic may have added a lot of stress to your company. Whether you had to close your doors or drastically cut down on your services, your business is suffering, and your employees are struggling. You know that your employees make all the difference to your business, and you want to continue paying them during this trying time. But where are you going to get the money? The Paycheck Protection Program (PPP Loan) may be just what you need. Here’s all the info you need to decide.
What Is a PPP Loan?
As part of the CARES Act, the PPP loan program was designed to provide funds to small businesses to continue meeting their payroll expenses for eight weeks and a few other associated expenses. The goal was to help small businesses keep afloat and to provide financial relief to employees. This program is administered by the Small Business Administration (SBA) and its Business Loan Program Account.
The CARES Act allocated $659 billion to the PPP program, and it went quickly. Additional funds were allocated in another stimulus package and made available on April 24, 2020. If you’re approved for a PPP loan, you receive two and half times your current payroll with a maximum benefit of $10 million. In some cases, you can get 100% of your PPL loan forgiven. You can also apply for both the PPL and the EIDL.
What Is the Difference Between a PPP Loan and an EIDL?
The Economic Injury Disaster Loan (EIDL) program isn’t new in the wake of the Coronavirus. It’s an established program that provides aid to businesses in the wake of natural disasters, such as hurricanes, floods, and tornadoes.
Both programs are designed to aid businesses and help them stay afloat during hard times that aren’t avoidable. The major difference is that the PPP provides funds to meet payroll and the EIDL covers the loss of profits and revenue. While EIDL was open to only agricultural businesses, it has become available to all business owners who qualify as of June 25, 2020.
Is My Company Eligible for a PPP Loan?
In order to qualify for the PPP Loan, you must first prove that your business has been negatively impacted by the COVID-19 pandemic, and you must have fewer than 500 employees on the payroll. When you fill out the loan paperwork, you’re certifying that you need the loan because of the current uncertainty in the business world. There are further business categories that qualify, such as:
- Businesses that are considered accommodation or food service with fewer than 500 employees. This includes hotels, restaurants, catering services, and more.
- On April 19, 2020, the PPP Loan application extended to sole proprietors, gig workers, the self-employed, and independent contractors
- Franchises that are independently owned and operated
- Tribal businesses
If you fit into these categories, you can apply for the PPP Loan.
Where Can I Apply for a PPP Loan?
Although the SBA administers the PPP Loan program, the department has approved 1,800 participating lenders to oversee the loans and distribute the money. You can also apply with the Farm Credit System institution, federally-insured credit unions, and federally insured depository institutions.
The SBA continues to approve and add new lenders to the program. You can start by contacting your current financial institution to see if they are already approved to participate in the program or consult the SBA Paycheck Protection Program lender search tool to find a place to apply.
These are the only places approved to authorize and disburse a PPP Loan. You need to be careful of scammers during this turbulent time.
Steps for Applying for a PPP Loan
Applying for the PPP Loan is relatively easy. Here are the steps:
- Go to the SBA to download and print the PPP Loan application.
- Fill out the application, answering each and every question.
- As part of the application form you need to prove three things:
- Your business was open and operating on February 15, 2020
- You employed people
- The amount of your payroll
- Sign and date the application
- Submit the application
I’ve Applied! What Now?
After you’ve submitted your application, you wait for the approval. You can take this time to go ahead and apply for the EIDL program to receive even more help to keep your business running and improving your chances of serving the economic downturn due to COVID-19.
One thing to keep in mind if you receive both loans, you can only use the funds from one loan to cover one budget item. For instance, if you use your PPP Loan funds to cover payroll, you can’t use any of the EIDL program funds for payroll too. When you receive the funds, make sure that you use them for the stated purpose.
PPP Loan Forgiveness
By now, you’re probably looking through the text because you’re sure you read something about loan forgiveness. If you qualify, you can receive partial or complete loan forgiveness.
In order to qualify for loan forgiveness, you must keep all of your full-time employees on the payroll. If you’ve already let them go, you have 24 weeks after you receive the loan or until December 31, 2020, whichever one comes first, to rehire them.
You need to have spent at least 60% of the loan on payroll expenses to receive forgiveness. You can request for forgiveness on money that you spent on other expenses, such as rent and utilities, as long as it doesn’t exceed 40 percent of the loan amount,
Forgiveness of the loan can’t begin until the 24-week period of employment passes. This 24-week period starts when you receive the money.
Contact the Tax Professionals
At Silver Tax Group, we want to help our clients succeed and flourish even in these uncertain times. We can help you navigate your options and provide answers to all of your questions about the PPP loan program and your other options. Silver Tax Group can help your small business apply and secure a PPP loan.
