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  • Justin Smith CPA

Small Businesses Count on the Paycheck Protection Program

The Small Business Administration (SBA) announced last week that it had exhausted its $349 billion authorization for the Payroll Protection Program, designed to assist small businesses with maintaining payroll and certain other expenses resulting from the COVID-19 crisis. Approved loans are still being funded, but the SBA has currently suspended accepting new applications. According to the SBA, more than 5,000 lenders have approved 1.6 million loans as part of this program.


President Trump has called on Congress to authorize additional funding for the program, and all signs indicate that a strong bipartisan extension of at least $250 billion is more likely than not. Small business owners who have not yet applied and would like to should prepare their documentation as quickly as possible to submit to their bank for consideration for the loan.

Most small businesses now are probably aware that the program provides a forgivable loan provided that loan proceeds are used to cover payroll costs, and mortgage interest, rent, and utility costs over the eight-week period after the loan is made. Small businesses such as S Corporations, Partnerships and even sole proprietors / independent contractors are eligible.


Employee and compensation levels must be maintained and cannot exceed a $100,000 annualized salary per employee, but the loan can otherwise be fully forgiven with no repayments required. Employee benefits such as vacation and sick leave, health insurance and retirement benefits are included in the calculation, along with state employer taxes such as unemployment.


Documents you will need include 2019 federal payroll returns, state unemployment returns, business tax returns, business bank account information, a completed application and other documentation as required by your bank.

The loan can be up to 2.5 times your average 2019 monthly payroll cost, as defined by the SBA. For any amounts not fully forgiven, the loan terms are incredibly generous: payments are deferred for 6 months with a 2-year term, and the interest rate is only 1.0 percent. Further, there are no prepayment penalties or fees. No personal guarantee is required, nor is any collateral.


Loan applications are made through your established bank, and many banks will have specific requirements, so check with your personal relationship banker for more information.

The other program directly administered by the SBA is the Economic Injury Disaster Loan (EIDL). While is seemed originally that loans up to $2 million were available at a 3.75% interest rate along with a $10,000 forgivable emergency grant, more details have come out. The SBA has announced that it will provide a $1,000 per employee grant up to $10,000 that does not have to be repaid. Further, the actual loan amounts are being advertised as much smaller at $15,000. The emergency grant, used for business purposes, has no obligation to be repaid as long as it is used for business s expenses.


Small business owners should visit www.sba.gov/disaster for more information.

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