The outbreak of the Coronavirus has impacted people’s lives on a day-to-day basis in unimaginable ways. This has led the Small Business Administration (SBA) to issue its interim final rule regarding the Coronavirus Aid, Relief, and Economic Security (the CARES Act). This is federal legislation is providing approximately $2 trillion in emergency funds to help the economic crisis that is impacting people and businesses throughout the country as a result of the Coronavirus. Part of this relief package includes the Paycheck Protection Program (PPP). This was put in place to provide $349 billion in small business loans.
What is PPP?
Small businesses and sole proprietorships were able to begin applying for PPP loans beginning on April 3, 2020, while independent contractors and self-employed individuals began applying on April 10, 2020. These loans exist with the intention of covering payroll and other designated expenses for businesses through existing SBA lenders.
What Can I Borrow?
Small businesses are eligible to borrow 250 percent of their average monthly payroll expenses up to a total of $10 million. The amount is intended to cover up to eight weeks of payroll expenses in addition to other amounts for making payments for debt obligations. The loans may be applied to any time between February 15, 2020 and June 30, 2020.
How Can I Use the Money So That the Loan Will be Forgiven?
The amount of the loan’s principal that can be forgiven at the end of the eight week period is equal to the sum of expenses for the following:
- Payroll. This includes employee’s 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.
- Existing interest payments on mortgages
- Rent payments
- Utility service agreements
It is important to know that, if businesses want to use PPP loans for other business-related expenses, they are free to do so. However, the loan will not be forgiven in these cases. If the full principal of the loan is forgiven, the borrower is not responsible for the interest accrued in the covered period. The rest of the loan that is not forgiven will be paid in accordance with the terms agreed upon by the business and the lender.
When is the Deadline to Apply?
The deadline to apply for the PPP loan was set at June 30, 2020. However, the PPP Guidance encourages businesses to apply as soon as possible, as the high demand is most likely to cause funding to reach its capacity before the designated date.
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The Lauterbach Law Firm is proud to serve clients throughout Rockland County who are faced with legal matters related to estate planning, real estate, foreclosure defense, landlord-tenant law, business law, and criminal defense. If you require the services of an experienced team of attorneys, contact The Lauterbach Law Firm today to schedule a consultation.