The coronavirus (COVID-19) outbreak has hit the U.S. hardest of all countries, and caused the nation’s economy to take a significant downturn. With the requirements of social distancing extending for most states, the U.S. government has offered a Paycheck Protection Program to help small businesses during this pandemic.
Here’s the information you need to know about this relief program.
What is the Paycheck Protection Program?
At its core, the Paycheck Protection Program is a business loan that is especially designed to assist small businesses through the COVID-19 outbreak. It was passed as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
As its name suggests, the Paycheck Protection Program comes in the form of direct cash assistance to help employers manage workforce payroll without any interruption. This is meant to assist business owners in retaining their staff and protecting their livelihood from getting irreparably affected by the novel coronavirus.
It is also an unsecured loan, which means that you don’t have to provide any asset as collateral. If you qualify as a small business owner, proprietor or independent contractor, your application is eligible to get processed without a secured asset.
Does it come with any special relief?
To ensure that the Paycheck Protection Program doesn’t affect the long term financial management of your small business, it is offered at the specialized interest rate of 1 percent and a loan maturity date of 2 years.
The loan is also forgivable after disbursement. If you prove that at least 75 percent of the amount is used for payroll, you won’t have to pay off the loan. Other expenses from the cash assistance can include mortgage or rent payments, as well as utility bills.
The loan also comes with the special relief of delayed repayment. This means that you won’t have to make a monthly repayment for 6 months.
Who can apply for the Paycheck Protection Loan?
All businesses that fall under the U.S. Small Business Administration (SBA) size standards qualify for the loan.
Since the size standards vary on a case to case basis, it is important that you check these requirements before moving forward with your application.
Special considerations are also made for certain industries and sectors, which are outlined and explained by the SBA. You can refer to SBA resources to check information specific to your business or its respective segment.
Who can help you get the loan?
Since the Paycheck Protection Program loan is being facilitated by the SBA, it is available through all SBA affiliated lenders.
You can also reach out to the following institutions to initiate the application process.
- Federally insured depository institutions.
- Federally insured credit unions.
- Farm Credit System institutions.
According to the SBA, it is working to make the loan available through other lenders. However, no announcements have been made on that part yet.
How can you apply for the program?
Apart from reaching out to one of the institutions mentioned above, you can start preparing for your application by downloading the required form through the SBA website.
You can then file your application and follow the required steps to get the loan for your business.
It is prudent to mention that at the time of writing, the SBA is not accepting any new applications due to running out of loan appropriations. This might change in the future, which is why you must keep an eye out for updates regarding this developing situation.