The newly enacted Coronavirus Aid Relief and Economic Security (CARES) Act will provide a stimulus aid package to individuals and businesses in need. The Act includes a $349 billion business loan program called the Paycheck Protection Program to offer relief measures to small businesses, primarily to keep employees on payroll and cover other critical expenses.
The Small Business Administration (SBA), the federal agency that administers the Program issued guidance on the evening of April 2, 2020. While we at JD Bank are reviewing the federal regulations and execution instructions, we wanted make the current Program details known. We will continue to update our website and social media pages as information becomes available.
Important elements of the Program:
- Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. We encourage you to apply as quickly as you can because there is a funding cap.
- Eligible businesses include small businesses, 501(c)(3) organizations, veterans’ groups or tribal businesses with 500 or fewer employees, or those that otherwise meet SBA size standards. This includes sole proprietors, independent contractors, and other self-employed individuals. Certain accommodation, lodging, and food services businesses with no more than 500 employees per physical location are also eligible.
- Recipients can use the loans for certain payroll costs — including salaries and commissions up to $100,000 per individual, regular paid leave, and group health-care benefits — as well as certain mortgage, rent, and utility payments. (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
- Businesses must have been in operation by February 15, 2020, to qualify.
- Eligible businesses can receive loans up to 2.5 times their average monthly payroll, not to exceed $10 million.
- Loans under the program are fully guaranteed by the U.S. government.
- Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
- A recipient must certify that its business has been affected by COVID-19 and that it will use the funds to retain workers, maintain payroll and meet other debt obligations. Loans will also be subject to the qualification requirements, terms, and conditions of the Program.
- You can find more Program details at sba.gov/ppp.
As information on the CARES Act becomes available, including the Paycheck Protection Program, we will update our information.
You will need to have the following information and documentation to submit an application:
- Payroll documents for 2019 and 2020 to include payment on group health benefits, including premiums paid, and any retirement benefits
- 2019 company financial information
FROM THE SBA.GOV WEBSITE
The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.
SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.
Lenders may begin processing loan applications as soon as April 3, 2020. The Paycheck Protection Program will be available through June 30, 2020.
Who Can Apply
The following entities affected by Coronavirus (COVID-19) may be eligible:
- Any small business concern that meets SBA’s size standards (either the industry based sized standard or the alternative size standard)
- Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
- 500 employees, or
- That meets the SBA industry size standard if more than 500
- Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
- Sole proprietors, independent contractors, and self-employed persons
Loan Details and Forgiveness
The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
This loan has a maturity of 2 years and an interest rate of 1%.
If you wish to begin preparing your application, you can download a sample form to see the information that will be requested from you.
For more information on documentation needed for loan forgiveness, please click here.
In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are currently eligible to apply for disaster assistance.
Enhanced Debt Relief is also available in SBA’s other business loan programs to help small businesses overcome the challenges created by this health crisis.
For information on additional Lending options, please click here.
SBA provides local assistance via 68 district offices and a nationwide network of resource partners. To find resources near you, please click here.