Relief for Small Businesses: The Paycheck Protection Program
In an attempt to alleviate the economic impact of COVID-19 on small businesses, individuals, communities, and governments are doing what they can to support industries and companies that have been hit the hardest.
On March 27th, Congress passed the CARES Act (Coronavirus Aid, Relief, and Economic Security). President Trump said he signed the “single biggest economic relief package in American history to deliver urgently needed relief to our nation’s families, workers, and businesses.”
The legislation will provide relief to small businesses in three different ways:
- The Paycheck Protection Program
- The expanded U.S. Small Business Administration (SBA) Economic Injury Disaster Loan program
- Updated business tax provisions
The CARES ACT and The Paycheck Protection Program
The Paycheck Protection Program is one of the most important programs of the CARES ACT. The program is designed to provide a direct incentive for small businesses to keep their workers on the payroll. It consists of $350 billion in government-backed loans. This will help small businesses maintain employees’ payment through June 2020.
- Any small business concern that meets SBA’s size standards (either the industry based sized standard or the alternative size standard)
- Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
- 500 employees, or
- That meets the SBA industry size standard if more than 500
- Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
- Sole proprietors, independent contractors, and self-employed persons
*Companies must have been operational on February 15, 2020
Additional notes on the program include:
- Approved applicants can borrow up to 2.5 times their average eligible monthly payroll costs, up to $10 million
- Interest rates on the loans will not exceed 4%
- Though many factors will come into play, depending on the amount and how businesses use the funds, there is a possibility that it–or a portion of the loan–may be forgiven
As more information about the Payment Protection Program continues to arrive, our team will update the information above. In the meantime, subscribe to our blog to get the latest industry updates directly to your inbox! You’ll receive industry updates, useful strategies, and guides on the current market conditions.