How Can My Business Get A Forgivable Paycheck Protection Program Loan?

Paycheck Protection Program

On April 3, 2020, small businesses and sole proprietorships can apply for a U.S. Small Business Administration Paycheck Protection Program loan through an existing Small Business Administration lender to cover payroll and other business expenses. Beginning April 10, 2020, independent contractors and self-employed individuals can apply. How can your business get a Paycheck Protection Program loan?

What Kinds of Small Businesses Can Apply?

All kinds of small businesses are eligible for a Paycheck Protection Program loan, including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors, as long as the business does not have more than 500 employees.

What is the Deadline to Apply?

The deadline to apply for a U.S. Small Business Administration Paycheck Protection Program loan is June 30, 2020.

Where Does My Small Business Apply?

A small business applies for a Paycheck Protection Program loan through any existing U.S. Small Business Administration lender, and a list of approved lenders can be found online. The list includes Harbor Bank, Howard Bank, Chesapeake Bank, The Bank of Glen Burnie, Old Line Bank, Point Breeze Federal Credit Union, Revere Bank, Farmers & Merchants Bank, Commerce First Bank, Carroll Community Bank, Sandy Spring Bank and many other lenders.

What Do I Need To Apply?

In order to apply for a Paycheck Protection Program loan, the business is required to complete the Paycheck Protection Program application in addition to providing all required documentation. The business must also certify that:

  1. Current economic uncertainty makes the loan necessary to support your ongoing operations;
  2. The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments;
  3. You have not and will not receive another loan under this program;
  4. You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting this loan;
  5. Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs;
  6. All the information you provided in your application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law;
  7. You acknowledge that the lender will calculate the eligible loan amount using the tax documents you submitted. You affirm that the tax documents are identical to those you submitted to the IRS. And you also understand, acknowledge, and agree that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.

What Can the Paycheck Protection Program Loan Be Used For?

The Paycheck Protection Program loan must be used for payroll costs, including employee benefits, interest on mortgage obligations incurred before February 15, 2020, rent, as long as the lease agreement was in effect prior to February 15, 2020, and utilities for services that began before February 15, 2020.

Payroll costs include salary, wages, commissions and tips, and benefits include vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums, payment of any retirement benefit, and State and local taxes (not Federal).

What is the Amount of the Loan?

The amount of the Paycheck Protection Program loan is up to 2 months of average monthly payroll costs over the past year plus an additional 25%, up to $10 million.

Is the Paycheck Protection Program Loan Forgivable?

Yes – at least part of the Paycheck Protection Program loan is forgivable. All amounts used for payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan are forgivable. Any amounts not used for these expenses is not forgivable. Also, in order to be forgiven, the business must maintain its employees as well as salary amounts. If full-time staff headcount is decreased, the amount of loan forgiveness will be reduced, and if employees salaries or hours are cut by more than 25% for employees that earn less than $100,000.00 per year, the loan forgiveness amount will be reduced.

If you have terminated your employees, you can re-hire them until June 30, 2020.

How Do I Request Loan Forgiveness?

In order to request loan forgiveness for a Paycheck Protection Program loan, the business must submit a request to the lender which includes documentation to demonstrate that all employees have been maintained at their current salary rate, and proof of payments of business expenses such as mortgage/lease payments and utility payments. The veracity of these documents must be certified, as well as a certification that the loan funds were used for these expenses. Within 60 days of submission, the lender must make a decision.

What Are Additional Loan Terms?

The interest rate on these loans is 1%, and the loan is due in 2 years. Although payments are deferred for 6 months, interest does accrue on the loan during the deferment period. No collateral or personal guarantees are required.

If you have questions about the SBA Paycheck Protection Program, please call Steiner Law Group at (410) 670-7060.

Avatar of Eric Steiner, Esquire

About Eric Steiner, Esquire

Mr. Steiner graduated from the University of Michigan Law School in 2006. Since then, he has focused his practice on bankruptcy, real estate, commercial and consumer collections, including representing the third largest lender in the greater Baltimore area.