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The New PPP Loan


PPP loan Gritforce

The Paycheck Protection Program was created last year as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES). The program is backed by the Small Business Administration (SBA) and provides small businesses with cash-flow assistance to keep workers on payroll during the pandemic.


PPP Loan


Small businesses with 500 or fewer employees are eligible for a PPP loan. These businesses include S and C corporations, LLCs, private nonprofits, faith-based organizations, and veteran and tribal groups. Self-employed individuals like contractors and sole proprietors are also eligible. Businesses that are ineligible include farms, casinos, hedge funds, private equity firms, and businesses in the process of declaring bankruptcy.


The terms of PPP loans are very generous; they have an interest rate of 1% and a maturity of two years (5 years if issued after June 2020). There are no fees or collateral required. Businesses can borrow 2.5 times their average monthly payroll cost based on 2019 (not to exceed $100,000 annually per employee) to cover eight weeks of payroll. When calculating the amount to borrow, keep in mind what PPP loans can and should be used for:


● Payroll: salaries, wages, vacation, maternity, family, medical, and sick leave, health benefits, bonuses, and hazard pay

● Rent: can be used for rent if the lease was signed before Feb. 2020