The recently finalized deal to provide increased economic relief to small businesses includes $310 billion for the PPP (Paycheck Protection Program). This new federal loan program is allowing qualified banks to offer low-interest loans that can be forgiven at a later time. The deal was finalized after Banks and other affiliated small business industries were overwhelmed by the tremendous amount of applicants, forcing many businesses to be left with nothing to show for there efforts in trying to acquire a loan.
Tuesday, April 21st the coronavirus aid deal was finalized for $484 billion in an attempt to fill the gap of the many businesses affected and still with no help.
The additional small business funding was moved forward, the center of attention, the Paycheck Protection Program. The program was initially vastly overwhelmed, with a substantial number of small business owners falling short in securing the forgivable loans through banks although early to the party when banks like Bank Of America received 10,000 applications within the first hour for their small business loan program.
It became apparent the application process was not thoroughly planned, not too long later finding out there wasn’t any more money to be given. Also, it was reported many small business owners found that banks were not accepting their application, later noting that banks were prioritizing existing customers.
Among those that applications were received, a major portion of the money was bled by entities that a program that’s for small businesses should not be applying for. Businesses like large-scale restaurant chains and major institutions got their big piece of the pie under the existing terms, while many owners of actually small businesses were left with nothing.
With more money being brought to the forefront many questions are coming about but here are some of the most common we found.
Costs new loan covers
Businesses that stand eligible need to comply with investing the money towards payroll by hiring back or keeping employees and only then does the money become forgivable. The maximum loan under the PPP is $10 million, that’s 2.5 times a company’s average monthly payroll. The new loans will cover payroll, employee benefits, mortgage interest obtained before February 15, rent and utilities under lease agreements in force before that date, and utilities for which the service began before February. According to a regulation published on April 2, at least 75 percent of the loan must go to payroll.
Payroll costs can include:
All are capped at $100,000 for each employee, including benefits for vacation, parental leave, medical leave, sick leave, and some other limited benefit categories. According to a Q&A April 6 fact sheet that was issued from the Treasury Department, the Paycheck Protection Program excludes sick and family leave that also qualifies for certain Internal Revenue Service tax credits. Information on the Cares Act tax credits can be accessed on the IRS website.
Again, the interest you pay on a PPP loan can be forgiven if you are able to keep paying employees during the first 8 weeks after you receive the loan. Interest rates for the Paycheck Protection Program initially were at 0.5 percent but were increased and now 1 percent. The Cares Act caps PPP loans at 4 percent, so it is possible the rate could increase again due to lenders concerns.
To get more information on the PPP program visit the sba.gov website for more info. Also, consult your CPA or attorney to better provide guidance on your company’s eligibility.
If your company has already been declined for the PPP or does not qualify, call Merchant Funding Solutions today at 800-791-0430 to discuss alternative business funding solutions.