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Small-Business Loan FAQs: Financial Relief from the COVID-19 Stimulus Package

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Corey Quinn

Just recently, the economy was given a shot in the arm with a historic $2 trillion stimulus package signed by President Donald Trump. The package was approved in order to keep the economy moving during the economic slowdown. Businesses with fewer than 500 employees have a massive opportunity because nearly $350 billion of the stimulus package was earmarked for small-business loans to help keep these companies afloat in the coming months.

To help you better understand the options your business has for financial support, we have outlined what you need to know about the small-business loans available through the COVID-19 stimulus package.

The Paycheck Protection Program

What is the Paycheck Protection Program and how does it provide relief?

The government’s COVID-19 small-business loans are being carried out through the Paycheck Protection Program. This program has brought a great deal of hope, as it provides loans to small and midsize companies to keep their employees on payroll.

If your business qualifies for the program, you can receive up to 2.5X times the average monthly payroll costs incurred during the year before the loan date (up to $10 million), according to information provided by the US Chamber of Commerce.

How do I know if I’m eligible to apply?

Your business must meet one of the following criteria to be eligible:

  • Fewer than 500 workers employed by the business (either full-time or part-time)
  • A small business that otherwise meets the SBA’s size standard
  • A 501(c)(3) with fewer than 500 employees
  • An individual who operates as a sole proprietor
  • An individual who operates an independent contractor
  • A self-employed individual who regularly carries on any trade or business
  • A tribal business concern that meets the SBA size standard
  • A 501(c)(19) veterans organization that meets the SBA size standard

This only applies to small businesses that have been operating before February 15th, 2020, and had employees that were paid salaries and payroll taxes, or paid independent contractors.

It should also be noted that for businesses in the accommodation and food services sectors, they can apply as long as they have no more than 500 employees per location. Additionally, for franchise businesses and businesses that receive financial aid from an approved small business investment company, the normal affiliation rules do not apply, which means they can be eligible for a PPP loan.

Can the loan be forgiven?

Yes. If you meet all of these requirements and you receive a loan through the Paycheck Protection Program, you may be able to have your small-business loan forgiven (up to the amount of the principal) if:

  • You maintain your payroll throughout the COVID-19 crisis, or
  • You restore payroll to previous levels after the crisis.

The loan forgiveness can be applied to qualified expenses paid with the loan funds (payroll, mortgage expenses, rent/lease expenses, utility payments, etc.) specifically during the eight-week period starting when the loan was originated.

It should be noted that the payroll costs that can be forgiven are capped at an annualized amount of $100,000 per employee. Additionally, the government will likely allow only up to 25% of the loan forgiveness amount to be for non-payroll expenses.

The loan forgiveness amount may be lowered if you lay off employees or cut wages by 25% between the dates of February 15th and April 26th unless these reductions are restored by June 30th.

When can I start applying for a PPP small-business loan?

Small businesses and sole proprietors were allowed to start submitting applications on April 3rd, and independent contractors and self-employed individuals can start applying on April 10th.

Where do I go to apply, and what information do I need?

You can find the most up-to-date Payment Protection Program borrower application form on the US Small Business Administration’s website. In addition to the general form, you will also need to provide payroll documentation.

Additionally, your lender will ask for a good-faith certification of the following:

  • Your business needs this loan to stay in operation due to the negative impacts of the current economic situation.
  • You will apply the funds from this loan toward payroll, your mortgage or lease, or utility payments.
  • You have no applications pending for another loan with similar purposes and a similar amount, nor have you already received such a loan in 2020. (There is, however, an opportunity to combine emergency loans from January 31st and the date this program became effective.)

Lenders will not be asking you for the following:

  • Whether you applied for and were unable to obtain credit elsewhere
  • A personal guarantee for the loan
  • Any collateral for the loan

How do I know which lender to use?

As long as you meet the requirements for the program, you can submit your application to an SBA-approved private lender, or through any participating federally insured depository institution, federally insured credit union, or Farm Credit System (FCS) institution. You can search for participating lenders in your area here.

How long do I have to apply?

You have until June 30th, 2020 to apply, but it’s best to apply as soon as possible considering that there is a cap on the amount of funds available under the stimulus package.

Where do I go for the latest updates on the Payroll Protection Program?

Considering how quickly everything is moving, you should continue checking for new information that is being released about the loan program. You can find the latest updates on the PPP loans (as well as updates on other forms of financial relief for small businesses) on the following websites: US Department of the Treasury, US Small Business Administration, and US Chamber of Commerce.

Resources to Help

We’re here to help you through this

At Scorpion, we know companies are struggling to understand what their next steps are when it comes to operating their businesses during this economic shutdown. That’s why we are continually putting together new marketing strategies to help you pull through this difficult time and put you in the best possible position to succeed.

If you have any questions about how we can help you find growth opportunities for your business, please contact our team.