(PPP) Forgivable Loan - U.S. Dept. of Treasury
Starting April 3 small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through their local lenders.
Starting April 10 independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through their lenders.
What can the loan be used for?
- Payroll costs, including benefits
- Interest on mortgage obligations, incurred before February 15, 2020
- Rent, under lease agreements in force before February 15, 2020
- Utilities, for which service began before February 15, 2020
Payroll costs include:
- Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee)
- Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit
- State and taxes assessed on compensation
- For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.
Loans can be for up to 2 months of the average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap. If the applicant is a seasonal or new business, borrower will use different applicable time periods for the calculation. Payroll costs will be capped at $100,000 annualized for each employee.
How much of the loan will be forgiven?
- Borrower will owe money when the loan is due if the loan amount is used for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
- Borrower will also owe money if it does not maintain staff and payroll.
- Number of Staff: Loan forgiveness will be reduced if borrower decreases its full-time employee headcount.
- Level of Payroll: Loan forgiveness will also be reduced if borrower decreases its salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
- Re-Hiring: Borrower has until June 30, 2020 to restore its full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
How does the borrower request loan forgiveness?
The borrower can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. Borrower must certify that the documents are true and that the forgiveness amount was used to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days.
What is the loan interest rate?
1% fixed rate.
When are loan interest payments due?
All payments are deferred for 6 months; however, interest will continue to accrue over this period.
When is the loan due?
In 2 years.
Is a loan pay-off allowed earlier than 2 years?
Yes. There are no prepayment penalties or fees.
Are there collateral requirements for these loans?
No. No collateral is required.
Does the loan require a personally guarantee?
No. There is not a personal guarantee requirement. However, if the proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against you.
What does the borrower need to certify in good faith as part of the application?
- Current economic uncertainty makes the loan necessary to support ongoing operations.
- The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments.
- Borrower will not receive another loan under this program.
- Borrower will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting this loan.
- Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
- All the information in the submitted application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law.
- Acknowledgement that the lender will calculate the eligible loan amount using the tax documents you submitted. Affirmation that the tax documents are identical to those submitted to the IRS. And borrower also understands, acknowledges, and agrees that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.