Now that the Federal Government has passed legislation assisting small businesses to survive the current economic shutdown here is what you need to know about getting an SBA loan under the Paycheck Protection Program (PPP).  

First, all states and territories of the country have been declared an economic disaster area so regardless of where your business is located you pass the first qualification to apply for these loans.  

Second, the legislation authorized the US Small Business Administration (SBA) to offer this as a form of disaster assistance loan to small businesses (meaning those with less than 500 employees), some non-profits and certain other organizations provided that these organizations were in business on or before February 15, 2020.  These loans are intended to assist these organizations to survive the economic effects of the coronavirus pandemic.  

These loans are for a maximum of $10 million with a current interest rate of 0.5% and a term of 2 years.   This interest rate could increase but that is unlikely. The loans are intended to help pay employees retaining them until business can start again.  In addition, the proceeds can also be used to cover rent, utility bills, payables and interest on debt payments. The intention is that the business can survive with its employees intact and its bills up to date.  No payments are due for the first 6 months.

The loan amount will be based on your historic payroll expense.  The average payroll costs for the prior year is averaged to find the monthly average payroll.  The loan amount will be no larger than 2 ½ times the monthly average. Payroll is defined as salary (up to the first $100,000 per person), wages, commissions, sick and other leave types, vacation pay, retirement contributions, group health insurance premiums and state and local payroll taxes.  Federal payroll taxes are NOT included.  

Loan applications are taken online through your bank.  The bank is tasked with accepting the loan application, ensuring it is complete, approving it according to SBA rules and sending it to the SBA.  Once the SBA assigns a loan number the bank can disburse the proceeds.  

You will not need to repay the amount of the loan spent for payroll and other qualified expenses over the 8 weeks following the disbursement of the loan proceeds.  At the end of the 8 weeks you will need to provide information to the bank that granted the loan regarding how the funds were used. In addition you will need to provide employee and payroll information.  If the number of full time employees has declined or the total payroll expense is less by a certain percentage the amount of the loan that can be forgiven may be decreased. The bank will approve or deny the loan forgiveness request within 60 days and pass that information to the SBA.    Any amount forgiven will not need to be reported as income on your business tax return.  

This new loan type is very advantageous in the current economic environment but is complicated.  Be sure to get your questions answered by your bank or by the SBA before applying. It is almost certain that the amount of this loan program will be increased due to its popularity.  

You can email the application and documents as attachments to disasterloans@sba.gov, fax them to 202- 481-1505 or mail them to:

U.S. Small Business Administration

Processing & Disbursement Center

Attn:  ELA Mail Department

P.O. Box 156119

Fort Worth, TX  76155

Remember to verify this information on the SBA.gov website.