Loans Under the Paycheck Protection Program

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The Small Business Administration along with the U.S. Department of the Treasury recently determined the dates that eligible businesses are able to apply for loans under the Paycheck Protection Program. DRT is here to help businesses apply for a loan under the Paycheck Protection Program.
The Paycheck Protection Program loan application can be found here.
1. When should I apply? If you are a small business with 500 employees or less, a non-profit, or a sole proprietorship, you are eligible to apply for a loan under the new Paycheck Protection Program starting on April 3, 2020. Independent contractors are eligible to apply for a loan on April 10, 2020. Borrowers should be aware that loans under the Paycheck Protection Program are only available through June 30, 2020. The CARES Act designates a certain amount of funds to be used for loans under the program, so businesses in need are encouraged to apply sooner rather than later.
2. How can I apply for a loan under the Paycheck Protection Program? To apply for a loan under the Paycheck Protection Program, borrowers must go through a lender. All FDIC insured lenders are able to issue loans under the program; however, lenders with previous experience issuing loans to small businesses under the Small Business Act (also known as 7(a) Loans) may be better equipped to deal with a loan under the Paycheck Protection Program. Currently, there are nearly 1,700 lenders who are approved by the Small Business Administration to issue 7(a) Loans. A list of lenders can be found here.
3. How much can I borrow under the Paycheck Protection Program? Under the Paycheck Protection Program, a borrower can apply for a loan in an amount equal to the average total monthly payments of the business’ payroll costs incurred during a one-year period prior to the date of the loan application, multiplied by 2.5. However, if the business requesting the loan was not in business beginning on February 15, 2019 through June 30, 2019, the borrower should calculate the business’ average total monthly payments for payroll costs incurred during January 1, 2020 through February 29, 2020 and multiply that figure by 2.5. The maximum loan amount under the Paycheck Protection Program cannot exceed $10 million.
4. What are considered payroll costs? Under Section 1102(a), the Paycheck Protection Program defines “payroll costs” as the combination of 1) salary, wages, and commissions; 2) cash tips; 3) payment for vacation, parental, medical, family, or sick leave; 4) allowance for dismissal or separation; 5) payment required for provisions of healthcare benefits including insurance premiums; 6) payment of retirement benefits; 7) payment of local tax assessed on the compensation of employees; and 8) any compensation or income payments made to a sole proprietor or independent contractor that is a wage, commission, income, or net earnings from self-employment or similar compensation–this amount cannot be greater than $100,000.00 in one year.
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