Part 4 of a series, covering the Paycheck Protection Plan for small businesses.
The Coronavirus Aid, Relief, and Economic Response (CARES) Act includes aid for Americans, both as individuals and for small business owners. This article covers the Paycheck Protection Plan.
Please note: before taking action based on this information, please do your own research, including speaking with your CPA, financial advisor or planner, employer, loan servicer, state unemployment office, and heck, maybe even a priest or shaman. My goal is to share my best understanding and to be of service. I hope you find this helpful.
On March 27th, the CARES Act was signed. This law provides for loans to corporations, small business loans, household payments, unemployment insurance, tax deferrals and deadline extension, and other funds. Most of the “goodies” we are interested in are in this act.
This article covers one of those goodies: the Paycheck Protection Plan (PPP). To participate, a business must either be running payroll or doing distributions to owners. If you are in start up mode and have not yet taken money out of your business, you will not be able to participate.
The PPP allows businesses to borrow two and a half times their wages, rent, and utilities. Average monthly wages are determined by totaling the amount paid between 4/1/19 and 3/31/20 and dividing by 12.
Provided the funds are used on approved expenses and at least 75% of those funds are used for payroll, the loans can be forgiven.
The funds must be spent by June 30th. There is no requirement that you show you have been impacted by COVID-19.
To apply, contact your local bank or credit union. Many banks are requiring that you have an existing relationship with them in order to apply, so the bank where you have your business checking account would be a good place to start.
These loans are available to self-employed people and independent contractors.
For more details, check out this press release on SBA's site. Here is another article with relevant information from the SBA.
Journal questions:
Is this a great time or a terrible time to be a small business owner? Why?
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