April 16, 2020
If you’re a small business, you may have heard of the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). Here’s a program breakdown to use as a resource when considering your options.
What is this program?
At a high-level, the PPP is a loan program that will help small business owners get back on their feet. The program originated from the Coronavirus Aid, Relief, and Economic Security (CARES) Act and is intended to provide small businesses with eight weeks of cash-flow assistance for payroll costs, including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities.
What about loan forgiveness?
One of the benefits of this loan program is that all or part of the loan could be forgiven if all employees numbers are maintained. Payroll costs must be 75% or more of your approved loan amount. Only 25% of the amount forgiven may be used on non-payroll expenses. The forgiveness will take place at the end of the eight-week period of employment following the generation of your loan.
A written request for loan forgiveness is required and your request must include the number of full-time equivalent employees, employee pay rates, your payments on an eligible mortgage or lease, and payments on utilities.
No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
This loan has a maturity of 2 years and an interest rate of 1% APR (Annual Percentage Rate).
How much can you borrow?
With the PPP, qualifying small business can request up to 2 months of their average payroll costs, plus and additional 25%. For example; if your 2 week average payroll costs is $8,000, simply add 25%. Your total loan amount would be $10,000.
There is no minimum loan amount for the GLCU program, and the maximum is $3,000,000.
Other important details
- The applicant must be a small business to qualify. This includes eligible non-profits, Veterans organizations, tribal businesses, sole proprietorships, self-employed, and independent contractors.
- Program starts April 3, 2020 and is available until the program is exhausted.
- Have additional questions? Please contact us at sbappp at glcu dot org and one of our experts will respond as quickly as possible.
Want more information?
As additional resources, below are links to get you started: