The Coronavirus Aid Relief & Economic Security (CARES) Act’s Paycheck Protection Program has made loans available to the small businesses, as part of the $2 trillion aid package unveiled in the Coronavirus Aid Relief & Economic Security, $349 billion was explicitly allotted to the Payment Protection Program (PPP).
The purpose of the Paycheck Protection Program is to encourage small business owners to retain or rehire employees that have been laid off or furloughed amidst the COVID-19 business devastation. The loans will be forgiven if specific requirements are met for this loan program.
Why is the Paycheck Protection Program gaining Attention?
This program adorns with federally guaranteed loans to businesses having less than 500 employees to cover payroll and other essential costs.
The federal government mainly focuses on releasing and resonating funds instantly with as little red tape as possible. The funds availed through Paycheck Protection Program give a significant boost to small businesses. Still, the exciting part is if you use these funds to retain your laid-off employees, then these loans bear a policy that if you abide by the rules, then the funds don’t need to be repaid.
How Can These Funds Be Used?
Funds secured through Paycheck Protection Program are considered potentially forgivable, if you are using the funds according to the laws and fulfilling the requirements, you are good to go with these loans.
Now the question arises of how these funds can be invested. You can pay off the costs, including office utilities, cloud computing software, and the cost of worker protections like health insurance and facility modifications necessary to comply with the recent COVID-19 safety guidelines.
Are loans Primarily Intended to the Coverage of the Payrolls?
Loans are primarily intended to cover payroll costs (including essential employee benefits), rent, mortgage interest and utilities.
Payroll cost includes:
- Salary and wage
- Cash tips
- Payment for family, medical or sick leave
- Dismissal or separation allowance
- Health Care benefits
- Retirement benefits
- State and local taxes
What Do Small Businesses Owners Need to Ensure for Forgivable Loans?
Loans availed through paycheck protection programs would be entirely forgiven if all employees are sustained on the payroll for the specific duration of time (it stays a pre-defined tenure), and the loan can only be used only for the following reasons only:
- Payroll costs
- Additional wages for tipped employees
- Rent on lease
- Mortgage interest
Does my Business Fit for a loan under the Paycheck Protection Program?
Specifically, your Business is eligible if you properly abide by the following rules:
- If your small Business entertains not more than 500 workers
- If your small business meets the SBA’s size standard
- For the individuals who have been operating as a sole proprietor and as an independent contractor
- A self-employed individual
- A person who regularly carries on any trade
- A tribal business concern that fulfills the SBA size standard
What lenders acquire for your loan application?
Lenders ask applicants for a good-faith certification that entails the following ones;
- The uncertainty of the current economic conditions amidst the pandemic makes the loan application request tangible and necessary to support ongoing business operations.
- The borrower will only borrow the loan aimed to retain current workers and maintain their payroll.
- The borrower will make payments inclusive for the mortgage, lease, and utility payments.
- The borrower does not have a pending application for a different loan intended for the same purpose.
Which Business Can’t Qualify for Paycheck Protection Program Loan (PPP loan)?
- Multi-level Marketers
- Businesses who lend or invest (e.g., banks and investment companies)
- Political and policy lobbyists
- Businesses who promote religion
- Businesses which restrict patronage
- Gambling and drugs businesses
- Household employers (e.g., housekeepers and nannies)
- Businesses dealing with prurient sexual material
How Much Can a Company Receive?
Funds obtained via Paycheck Protection Program can be up to 2.5 times the borrower’s average monthly payroll costs, not to exceed $10 million benchmarks.
What are the Loan Terms?
Terms of the loan are as follows:
- No personal guarantee or collateral is required.
- Loans are 100% guaranteed by the government.
- No “credit elsewhere” tests (generally required for SBA loans).
- No borrower fees or prepayment penalties.
- Loans are non-recourse against owners/shareholders so long as used for authorized purposes.
BitX Funding is the online marketplace for small business owners looking to fund a project. We specialize in connecting small business owners with lenders who will compete for your business. We believe small business owners drive the economy and we are passionate about helping your company reach its full potential.
You can reach a loan specialist toll-free at 1-800-824-2407, or email at firstname.lastname@example.org, or apply online here and we can guide you on which loans are the best fit for your business.