Apr 03, 2020 / News
The spread of coronavirus has impacted businesses, both large and small. With the sudden, dramatic dip in consumer spending, many companies are anticipating several months of financial hardship. In an effort to alleviate the severe economic impacts of the pandemic, the federal government enacted a massive economic rescue package for American companies. The package was officially signed into law on March 27 and is known as the Coronavirus Aid, Relief, and Economic Security Act—or CARES Act for short.
One of the law’s key provisions is a 349 billion-dollar small business loan program known as the Paycheck Protection Program. The program encourages American small businesses to avoid layoffs and to keep their people employed by offering forgivable loans to cover payroll and other operating expenses.
American small businesses with 500 or fewer employees can apply for the loans as long as they can provide a good-faith certification that their companies have been impacted by the coronavirus pandemic. Self-employed individuals and independent contractors are also eligible to borrow money.
Loan amounts are determined by each company’s expense structure. Loans will cover up to two and one-half months of operating costs based on 2019 expenses, including:
The maximum loan size available is $10 million.
The loans are federally guaranteed and tax free. Unlike standard government loans, business owners will not need to provide collateral or a personal guarantee. Small businesses will not have to make payments for six months. And, if companies do not lay off workers or reduce employee wages by more than 25%, the government may convert the loan into forgivable grants. Payroll costs for laid-off employees will not be forgiven.
Companies will apply for Paycheck Protection loans directly through any lending institution that has previously been approved to participate through the existing Small Business Administration (SBA) 7(a) lending program. The Department of Treasury will also approve additional lenders.
In addition to its impact on global health, novel coronavirus (COVID-19) has negatively impacted all types of businesses. Fortunately for small companies, the federal government is releasing billions of dollars in forgivable loans. Companies can use the money to keep people employed and to keep our economy moving forward.
As an SBA preferred lender, we can process applications for forgivable loans under the new Paycheck Protection program. Contact Utah First at email@example.com to start your application process today.