There is a cynical meme going around the internet saying that the only money Americans will get from the federal stimulus package is $1,200 per adult, or $500 per child for every household. It’s a great example of how memes are not facts. Memes are not facts. Memes are not facts. (If you say it three times it’s supposed to sink in better).
In fact, there is $350 billion under the Paycheck Protection Program, a piece that our own Sen. Collins helped create in a bipartisan manner with three other colleagues under the Keep American Workers Paid and Employed Act portion of the stimulus.
What is the Paycheck Protection Program?
Here is the direct language in the act: “The Paycheck Protection Program would provide 8 weeks of cash flow assistance through 100 percent guaranteed loans to small employers who maintain their payroll during this emergency. If the employer maintains its payroll, then the portion of the loan used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven…” So, the loan is forgiven if it goes to payroll expenses. Here is some more information: What is the loan amount under the Paycheck Protection Program? The loan amounts would be up to 250% of the employer’s average monthly payroll for two months or eight weeks (depending on your payroll terms) with a cap at $10M.
Who is eligible for the Paycheck Protection Program? Lots of employers including: Small employers with under 500 employees (and those meeting the SBA standard for that size); Self-employed people and gig economy workers; 501(c)3 and 501(c)19 organizations (typically those organizations are charities, non-profits, and military non-profit organizations, as long as they have under 500 employees; other unique cases.
Where can I apply for the Paycheck Protection Program?
You can apply for the Paycheck Protection Program (PPP) at any lending institution that is approved to participate in the program through the existing U.S. Small Business Administration (SBA) 7(a) lending program and additional lenders approved by the Department of Treasury. This could be the bank you already use or a nearby bank. There are thousands of banks that already participate in the SBA’s lending programs, including numerous community banks. You do not have to visit any government institution to apply for the program. You can call your bank or find SBA-approved lenders in your area through SBA’s online Lender Match tool found on www.SBA.gov
How can I use the money such that the loan will be forgiven?
The amount of principal that may be forgiven is equal to the sum of expenses for payroll, and existing interest payments on mortgages, rent payments, leases and utility service agreements. Payroll costs include employee salaries (up to an annual rate of pay of $100,000), hourly wages and cash tips, paid sick or medical leave and group health insurance premiums. If you would like to use the Paycheck Protection Program for other business-related expenses, like inventory, you can, but that portion of the loan will not be forgiven.
When is the loan forgiven?
The loan is forgiven at the end of the eight-week period after you take out the loan. Borrowers will work with lenders to verify covered expenses and the proper amount of forgiveness.
What is the covered period of the loan?
The covered period during which expenses can be forgiven extends from Feb. 15, 2020, to June 30, 2020. Borrowers can choose which eight weeks they want to count towards the covered period, which can start as early as Feb. 15, 2020.
How much of my loan will be forgiven? What if I have to lay off some employees will it still be forgiven?
The purpose of the Paycheck Protection Program is to help you retain your employees, at their current base pay. If you keep all of your employees, the entirety of the loan will be forgiven. If you still lay off employees, the forgiveness will be reduced by the percent decrease in the number of employees. If your total payroll expenses on workers making less than $100,000 annually decreases by more than 25 percent, loan forgiveness will be reduced by the same amount. If you have already laid off some employees, you can still be forgiven for the full amount of your payroll cost if you rehire your employees by June 30, 2020.
Am I responsible for interest on the forgiven loan amount?
No, if the full principal of the PPP loan is forgiven, the borrower is not responsible for the interest accrued in the eight-week covered period. The remainder of the loan that is not forgiven will operate according to the loan terms agreed upon by you and the lender.
What are the interest rate and terms for the loan amount that is not forgiven?
The terms of the loan not forgiven may differ on a case-by-case basis. However, the maximum terms of the loan feature a 10-year term with interest capped at 4% and a 100% loan guarantee by the SBA. You will not have to pay any fees on the loan, and collateral requirements and personal guarantees are waived. Loan payments will be deferred for at least six months and up to one year starting at the origination of the loan.
Other Business Resources
Our chamber has a COVID-19 Community Resource Page (on the chamber website at www.midcoastmaine.com has more information on this program and other programs including: Finance Authority of Maine Loans for Businesses AND Individuals SBA Disaster Loans U.S. Chamber of Commerce Calculation sheet for the Paycheck Protection Program to determine the right loan amount request. Most of the information listed in this week’s article was taken directly from these sources and the wording of the Keep American Workers Paid and Employed Act. If you have any questions please reach out to the chamber or find us online. E-mail is best: info@midcoastmaine.com or executivedirector@midcoastmaine.com We would love to help you.
Comments are not available on this story.
Send questions/comments to the editors.
