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Small businesses across the country have taken a big hit amid the coronavirus pandemic, as stay-at-home orders and social distancing guidelines have meant many have shut their doors, laid off employees or even ceased operations.
Several large companies and cities across the country are offering some respite to small businesses by launching grant programs to keep them afloat. The federal government also launched the Paycheck Protection Program, a $350 billion fund for direct business loans as part of the $2 trillion Coronavirus Stimulus Package signed into law last month by President Trump.
On April 21, the Senate approved an additional $310 billion to be added to the Paycheck Protection Program, as the program ran out of the initial fund in just under two weeks after launch.
Here, WWD breaks down the specifics of how to apply for the Paycheck Protection Program as a small business owner, including which businesses are eligible, where to apply and how to receive total loan forgiveness.
Who is eligible for a small business loan through the stimulus package?
The U.S. Small Business Administration’s web site states that those eligible for the Paycheck Protection Program are businesses with fewer than 500 employees. This includes businesses that are sole proprietorships, independent contractors, self-employed individuals, private nonprofit organizations or veteran organizations that have been impacted by the COVID-19 pandemic.
How do you apply for the small business loan?
Businesses can apply for the small business loan through any existing U.S. Small Business Administration lender or through any federally insured depository institution, federally insured credit union or Farm Credit System institution. Participating lenders vary by state, so be sure to check http://www.sba.gov/partners/lenders/microloan-program/list-lenders to find the nearest bank or participating financial institution to get started.
What is the purpose of the Paycheck Protection Program?
The program is meant to stem layoffs at small businesses by providing low-interest loans to cover payroll while state and federal mandates around the coronavirus are in place.
How much money does the Paycheck Protection Program offer?
The loan program offers up to $10 million to each small business, with a $100,000 cap per employee. The loan is meant to cover up to two months of the average monthly payroll cost with an additional 25 percent for operating costs such as rent, mortgage or utilities.
Is there an interest rate for the small business loan?
The loan has a maturity of two years and an interest rate of one percent.
How does a small business qualify for loan forgiveness?
The government will forgive a loan in full if a small business used at least 75 percent of the loan amount to continue paying employees. A loan will be partially forgiven if the amount allocated to payroll is less than 75 percent.
A business will owe more on a loan, if not the full amount, received through the program if it initiates layoffs or cuts employee pay.
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