A new rule regarding the Coronavirus Aid, Relief and Economic Security (CARES) Act and the Paycheck Protection Program (PPP) could help contractors running small and mid-size businesses gain greater access to low-interest loans for meeting short-term payroll needs.
The PPP program, which had been quickly exhausted of funding following its April 3 launch, was relaunched with $320 billion in new funding April 27. The Small Business Administration (SBA) program limits the access of corporate groups to the new funding.
The program changes include:
- Creating a third loan option, with increased risk sharing by lenders for borrowers with greater leverage;
- Lowering the minimum loan size for certain loans to $500,000; and
- Expanding the pool of businesses eligible to borrow.
According to the SBA website, which now features updated guidance on the PPP, SBA will fully 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. 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.
The loans have a maturity of 2 years and an interest rate of 1%.
The loans are designed to cover up to eight weeks of average monthly payroll, plus 25 percent.
We have collected the following information from third parties to help you understand these U.S. relief programs and your eligibility:
The U.S. Hispanic Chamber of Commerce (USHCC) Resource and Technical Assistance Guide to Expand Capital for Hispanic and Minority-Owned Small Businesses addresses various stimulus aid programs, including emergency and disaster assistance loans.
CARES Act programs
Learn more about the small business PPP at the U.S. Small Business Administration (SBA) where the following updated guidance on the PPP can be found:
- Joint Statement by Secretary Steven T. Mnuchin and Administrator Jovita Carranza on the Review Procedure for Paycheck Protection Program Loans
- Interim Final Rule on Seasonal Employees
- Interim Final Rule on Disbursements
- Frequently Asked Questions (Question 37)
- How to calculate PPP loan amounts
- Visit the U.S. Chamber of Commerce to learn about the FFCRA which includes new paid sick leave, paid FMLA, tax credits, and unemployment insurance information.
- Please check government websites in your area related to their COVID-19 response and potential additional assistance for businesses.
Additional information can be found at the U.S. Senate Committee on Small Business & Entrepreneurship.
For midsized business, the McDonald Hopkins’blog provides additional insights and resources.