Almost overnight, the Coronavirus pandemic has altered our lives. We wash our hands until they bleed. We avoid other humans like they all have the COVID. And worst of all, it has shuttered anything NOT deemed essential.
Sports? Cancelled. Movie theatres? Shut down. Malls? Apart from pharmacies, grocery stores, and other essential operators, they’re ghost towns.
As bad as the mind-numbing boredom of being stuck at home is, it won’t hold a candle to the economic damage this will cause. Tens of millions of people are out of a job. Businesses aren’t making money. Both need to pay the rent or a mortgage. It’s a disaster the likes of which we haven’t seen in over a century.
Thankfully, Congress acted promptly. Their first act of stimulus, the Coronavirus Relief, Aid, and Economic Security Act has spawned the Paycheck Protection Program. In short, this measure provides low-interest, forgivable loans to help businesses keep their lights on.
What is the Paycheck Protection Program?
The Paycheck Protection Program (PPP) is an initiative brought about by the passage of the Coronavirus Relief, Aid, and Economic Security Act. Owners of SMEs affected by the COVID-19 pandemic can apply for paycheck protection program loans through the Small Business Administration (SBA).
This emergency injection of capital is meant to help employers pay staff and cover costs during this difficult time. Applicants can apply for loans that will cover 250% of their average monthly payroll, up to a cap of $10 million.
When calculating the loan amount, the SBA will include healthcare costs, as well as state & local taxes. However, note that this subsidy will only cover up to $100,000 per employee.
When issued to business owners, they are to use these funds only for specific purposes. Recipients can only spend these funds on payroll, healthcare costs/premiums, interest-only payments on mortgages, rent, and utilities.
Loans given under the PPP are 100% forgivable, provided that the recipient uses the funds as directed. To attain complete loan forgiveness, recipients must use 75% of received capital on payroll costs. If the employer cuts wages after receiving PPP funds, the recipient will have to repay part of the loan.
Who Is Covered By The Paycheck Protection Program?
All businesses and non-governmental organizations employing no more than 500 employees are eligible for the Paycheck Protection Program. This eligibility stretches retroactively from February 15 until June 30, 2020.
There are exceptions to the above requirement. For instance, if you are a franchisee for a major corporate brand like McDonald’s, you are eligible to apply for a PPP loan. Corporate-controlled restaurants and hotels are also eligible, provided that fewer than 500 people work at each location.
Those who operate a company on tribal land can also apply for a PPP loan. And finally, gig economy workers, the self-employed, and owners of self-proprietor businesses also qualify for the Paycheck Protection Program.
To ensure access to PPP funds, applicants must file loan requests with the Small Business Administration by June 30, 2020.
How Do I Apply For Loans Under The Paycheck Protection Program?
To begin the Paycheck Protection Program application process, download your PPP application from the Small Business Administration website. The instructions contained therein are relatively straightforward – follow them precisely.
To complete your application, pull together documentation as requested. This step is crucial, as it proves you had a functioning, revenue-generating business before February 15, 2020. Of these, your monthly payroll reports are most important. However, present medical insurance payment information and/or Economic Injury Disaster Loan (EIDL) statements if they apply to your situation.
If you are self-employed, own a sole proprietor business, or are an individual contractor, you may have to also supply specific IRS forms. In particular, have form 1099-MISC ready if you’re a contractor, or 1040-C if you own a sole proprietor business.
Owners of larger SMEs should also have specific IRS documentation at the ready. These include form 940 (941 for seasonal businesses) for Q1 and Q2 2019, form W-3, and the W-2s of any employee who makes more than $100,000 annually.
Once you have filled out your PPP form, submit it to an SBA-approved lender. If you don’t know where to turn locally, you can also find SBA-approved lenders that issue PPP loans online.
You may have to wait several days to hear back. Due to unprecedented demand, processing times at the SBA have increased significantly. However, with over $30 billion disbursed as of April 8, funds are flowing. Be patient.
Hang In There
America has been hit with a disaster the scale of which we haven’t seen in modern times. Disaster response efforts that would be challenging under normal circumstances have been further complicated by COVID-19 protocol.
But, in true entrepreneurial fashion, we’re figuring things out as we go. The Paycheck Protection Program is now in place, and funds are flowing. Apply using the guidance presented in this article, and soon, you will have the help you need.