What You Need To Know About the Paycheck Protection Program
Everything you need to know about the Paycheck Protection Program.
During these unprecedented times there is a lot of uncertainty around the state of the economy. Many businesses have had to cut down on their operations whether by necessity or state regulations. Small businesses in many states have experienced anywhere between a 25% to 60% decline in revenues since the COVID-19 pandemic began, reported The Brookings Institution.
To help small businesses during this time, the government approved a federal relief program called the Paycheck Protection Program (PPP). Here is everything you need to know about how this government aid is helping businesses during the COVID-19 pandemic.
What is the Paycheck Protection Program?
The Department of the Treasury explained that the Paycheck Protection Program has authorized up to $349 billion in forgivable loans specifically for small businesses. With the loan, small businesses are expected to pay their employees during the COVID-19 pandemic.
These favorable loan terms are the same for everyone who applies and is approved as long as they satisfy two requirements:
- The loan amount was used to cover payroll costs (and most mortgage interest, rent and utility costs) over the 8 week period the loan was made.
- Employee compensation levels were maintained over the 8 week period.
It's important to note that payroll costs are capped at $100,000 for each employee on a yearly basis. For businesses with fewer than 500 employees, PPP can provide the financial assistance needed during these times to help keep companies running.
The PPP is helping small businesses pay their employees as part of the coronavirus relief plan.
How small businesses can apply
On April 3, 2020 small businesses and sole proprietorships were encouraged to apply for and receive PPP loans through existing Small Business Administration lenders, the Treasury explained. Businesses can submit a request to their lender and include documents on the number of employees they have, including their salaries or pay rates. Additionally, applicants should include information on mortgage, lease and utility obligations that may be covered by the loan as well.
If you receive a loan from the PPP, you are required to also show that the forgiveness amount was used to pay employees and make eligible payments on mortgage, rent or utilities. The Electronic Code of Federal Regulations outlines eligibility requirements for SBA loans , and small businesses, independent contractors, self-employed individuals and non-profits that qualify are encouraged to apply for this assistance. In fact, more than 87% of the PPP loans administered by Vectra Bank have been made to businesses with fewer than 50 employees.
No business is too small to be considered for a forgivable PPP loan, and every business owner who believes they could benefit from this assistance should check their eligibility and contact an SBA lender for more information.
Vectra Bank is an SBA-preferred lender and as of May 6, 2020 has obtained approval and/or funding for more than 3,000 PPP loans. We are well positioned to help small businesses efficiently navigate the loan application process, so contact us today to learn more.
For more information on the Paycheck Protection Program, review our fact page on FAQs.
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