You’ve probably heard about last week’s signing of the Coronavirus Aid, Relief, and Economic Security (CARES) Act—the largest aid package in history. Here’s a summary of the Act that we just published. There’s one provision you’ll want to be aware of if you’re a small business owner: the Paycheck Protection Program. This program offers loans that may be forgivable when used for the designated purposes!

Below is a summary of the Paycheck Protection Program in a question & answer format. If you’re interested in learning more about the Program, how much you qualify for, and how you can apply, please contact us to set up a call.

What is the Paycheck Protection Program?

The $350 billion program will help small businesses with fewer than 500 employees secure federal funding to cover essential cash flow needs. Here are a few highlights:

  • This is funding to help cover essential business expenses, like payroll, rent, and utilities between Feb. 15 and June 30, 2020.
  • If used for these purposes, the loan may be forgiven, meaning that it becomes a non-taxable grant.
  • Any small business owner can apply through an SBA-approved bank for no charge.

Who qualifies for these loans?
Small business owners who employ fewer than 500 people are eligible for the loan. This includes sole proprietors, independent contractors, non-profits, gig economy workers (like Uber drivers), and self-employed individuals.

How much money can I get?
The total loan amount is 2.5 times your average total monthly payroll cost (employees and contractors) incurred in the 12 months before the loan is made. The maximum loan is $10 million.

What can I use the money for?
You can technically use the loan for any business purpose, but for any portion of the loan to be forgivable, it must be used to cover these essential business expenses during any eight-week period between February 15 and June 30, 2020:

  • Payroll and commissions – salaries and compensation up to $100,000
  • Contractor fees
  • Healthcare insurance premiums
  • Retirement benefits
  • Mortgage, rent, and lease payments – not prepayments
  • Utilities
  • Interests on other debt obligations, like lines of credit

The full Program includes a number of restrictions, including certain employees who are already on Family Medical Leave or live outside the US. BJM can help you determine your company’s specific benefit.

How do I apply?
You apply through your current bank, or other SBA approved lender – most banks are approved. The application is free , the process has been streamlined, and no personal collateral is required. That said, the application process is still somewhat difficult. You’ll want to apply early, as there are limited funds available and some banks may become overwhelmed with applications.

Specific details will be finalized this week, but you’ll most likely need:

  • Previous tax returns
  • Copies of contractor 1099-MISC forms
  • Payroll tax filing summaries

BJM has the banking relationships in place to expedite our clients’ applications. We can help you apply for your loan if you need assistance.

How do I receive forgiveness on the loan?
As long as your average number of employees stays the same, and the compensation of your employees is not reduced by more than 25%, the loan amount spent on essential expenses (listed above) will be forgiven. You will apply for forgiveness through your lender, providing documentation for payroll and other essential expenses.

For loan money not forgiven, lenders must charge a fixed interest rate of 0.5%, and all payments (including interest) are deferred for 6 months.

How does it help the US economy?
If small business owners can ultimately retain and pay their employees and contractors during the crisis, the U.S. economy will be better positioned to recover after the threat subsides. The alternative? Closed businesses, under-staffed operations and even higher unemployment.

How can BJM help?

Whether you’re a current client or not, we can:

  • Calculate the amount of money you can borrow
  • Help organize your financial documents to simplify the application process
  • Maintain compliance with guidelines so you can apply for loan forgiveness

If you would like to discuss how BJM can simplify this process for you and your business, please contact your BJM CPA or contact the firm at 678-551-2900 or