Starting April 3, small business owners should be able to apply for a new, forgivable loan to help keep their businesses afloat during the coronavirus crisis, says Treasury Secretary Steven Mnuchin.
Nearly $350 billion has been allocated for that purpose in the new economic aid package.
WHO CAN I APPLY?
Generally, any small business with 500 or fewer employees is eligible.
That includes sole proprietorships, independent contractors, nonprofits, veterans organizations and tribal businesses.
In certain circumstances, businesses with more than 500 employees also may qualify (see SBA.gov). Applications will be accepted up to June 30, but the program is on a first come, first serve basis.
WHAT IS THE MONEY FOR?
The goal of the loan program is to help small businesses stay afloat.
So long as you use the funds to make payroll and expenses, such as utilities and your rent or mortgage, you won’t have to repay the loan and you will not owe income tax on the forgiven amount.
For your loan to be forgiven you must maintain your headcount and not reduce pay.
WHAT IF I HAD TO LET MY EMPLOYEES GO ALREADY?
You can still apply so long as you can show you had employees as of Feb. 15, 2020. You can use the money to rehire your staff. Loan forgiveness will apply so long as employees are rehired by June 30.
WHAT DO I NEED WHEN I APPLY?
Lenders will ask for a two-page application labeled Paycheck Protection Program, which can be found at Treasury.gov.
You must show lenders proof that your company was in operation on Feb. 15, 2020 and that you had employees for whom you paid salaries and payroll taxes.
You’ll need proof of average monthly payroll costs in 2019 (or for the first two months this year if your business is new).
Independent contractors and the self-employed, who must wait until April 10 to apply, need to show proof of “payroll and other certain expenses.”
You will not have to provide a personal guarantee or collateral to secure a loan, as you normally would for an SBA loan. But if you use the money for fraudulent purposes you will be subject to criminal charges. You will not be charged loan fees.
HOW MUCH MONEY CAN I GET?
Loans will be equal to 2.5 months of your average monthly payroll costs in 2019 (or the average of the first two months of this year for new businesses).
do i pay the money BACK?
You will not have to pay back the loan so long as you use at least 75% of the money you get on payroll costs (including wages, benefits, payroll and wage taxes), and the rest of the funds are spent on your business’ rent or mortgage, utilities and other overhead expenses.
The money must be spent in the first eight weeks after you receive the loan, and the amount forgiven will not be treated as taxable income. You’ll have to show proof of expenses.
Payroll costs eligible for forgiveness may not exceed $100,000 per employee.
WHERE CAN I GET THE LOAN?
The SBA will be posting a tool for you to key in your ZIP code to find lenders near you participating in the program.
If you’ve never taken out an SBA loan, you might try your primary bank first because lenders will be operating under Know Your Customer regulations which will be streamlined if you’ve previously worked with the lender. You should be able to apply online.
Visit Treasury.gov and SBA.gov.