CARES Act: Paycheck Protection Program (Small Business Owners, Self-Employed, & Gig-Workers)
Last Friday (3/27), President Trump signed the CARES Act into law – the largest economic relief package in our nation’s history. The CARES Act will include a $1,200 stimulus check to qualifying Americans, waived early withdrawal penalties on IRAs, a halt to RMDs, and assistance for small businesses.
In addition to unemployment insurance to freelancers and a potential $10,000 advance to business owners seeking an Emergency Economic Injury Disaster Loan, assistance will be available to small businesses through the Paycheck Protection Program. This program offers a forgivable loan to various small businesses that maintain their current payroll or hire back recently let-go employees.
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What is the Paycheck Protection Program?
The Paycheck Protection Program (PPP) is part of a $350 billion arm of the CARES Act, which offers assistance to small businesses and their workforce.
The PPP is a loan program offered through the Small Business Administration (SBA) expected to roll out on Friday, April 3rd. The two factors that differentiate this loan from others – primarily disaster relief programs – is the ease of access and the opportunity for loan forgiveness.
Policymakers are hopeful that PPP loans will be passed quicker than usual and offered from more approved lenders, making them more easily attainable.
The PPP offers 100% federally guaranteed loans to small businesses that maintain their current payroll throughout this emergency. Forgiveness may also be available to small businesses who were forced to layoff, but rehire after June 30th, however, the total forgiveness amount may be reduced.
Businesses will be given up to eight weeks of payroll plus 25% of overhead costs (Steven Mnuchin in an interview with Fox News). However, there is a maximum loan amount of $10 million. The loan will be retroactive from February 15th – June 30th, 2020.
How to Apply
According to Mnuchin, the full application documents and instructions should be made available late Monday (3/30) afternoon.
The first step in obtaining a loan is to contact your local bank and see if it’s an SBA-approved lender. If not, you may contact the SBA to find one.
From that point, it’s anticipated that the loan process will be quick and easy.
If you are currently receiving or awaiting a pending SBA loan (i.e. disaster relief), you are still eligible for a PPP loan as long as they are applied to different cost centers.
To come full circle, the Paycheck Protection Program will offer forgivable loans to various small businesses as long as the funds are used to maintain current payroll or rehire employees. The program is another facet of the recently passed CARES Act aimed at stimulating our economy and offering aid to the American workforce.
The information outlined in this article is a general description of the PPP. For more in-depth information, please refer to the images below provided by the U.S. Chamber of Commerce.
If you believe this loan program may be beneficial to you, please call our office to discuss your specific situation. Through the ups and downs of the market, our service to you is unwavering. Our team is available and working harder than ever to ensure that you are fully prepared and best-positioned when we return to normalcy.
Source: U.S. Chamber of Commerce
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The content provided herein is based on our interpretation of the CARES Act and is not intended to be legal advice or provide a tax opinion. This document is a summary only and not meant to represent all provisions within the CARES Act.