(Updated April 1, 2020)
This past Friday the massive $2.2 trillion stimulus bill was signed into law. This will have a major impact on you, your business, and your employees.
We're still working through the 800+ page bill but first, we wanted to break down key points for one of the most significant parts of the stimulus for small businesses — the Paycheck Protection Program. If you haven't heard, the program will provide up to $10 million in a forgivable loan through the Small Business Administration (SBA) to cover payroll and other expenses.
Given the funding cap and high demand, we recommend you reach out to your existing lender or an SBA-approved lender to get in line ASAP
Below, we've summarized key points regarding the program's operation and benefits (subject to change). Additional parts of the bill include direct payments to employees, as well as an expansion of the unemployment insurance program--adding $600 to the maximum weekly benefit and extending the time an employee can receive it. However, some of those benefits are mutually exclusive with the loan program. Also, note that Paycheck Protection Program loans are different than the SBA's Economic Loans Injury Disaster program.
Unlike typical SBA loans, the Paycheck Protection Program promises a streamlined application and favorable loan terms.
Loans amounts can be up to 250% of your average monthly payroll costs, but not more than $10 million.
Eligible payroll costs for employers include:
For sole proprietors or independent contractors, eligible costs include wages, commission, income, or net earnings from self-employment, again capped at $100,000 on an annualized basis.
Your loan is eligible for forgiveness when used to cover certain expenses over the 8 weeks after getting the loan, including:
However, forgiveness will be reduced if you:
If you've already made reductions in headcount and wages, you have until June 30, 2020 to restore your full-time employment and wage levels for any changes made between February 15, 2020 and April 26, 2020. Also, given the high demand and limited funding, the Treasury anticipates that not more than 25% of the forgiven amount may be for non-payroll costs.
We know for certain that loans will at least be facilitated through existing SBA 7(a) lenders (see our growing list here). FDIC-insured banks and credit unions can also participate, but - since they will need to be approved and enrolled - they may be more delayed than existing SBA participants. Application dates are staggered based on borrower type:
Although the program is open until June 30, 2020, there is a funding cap and we expect high demand, we recommend you reach out to your existing lender or an SBA-approved lender to get in line ASAP. They may not yet be ready to process applications, but you can get in the queue and start preparing your paperwork. At a minimum, start pulling together your tax and payroll documentation.