New Government Program for Small Businesses
Over the past few weeks, the United States government has announced a multitude of different programs aimed at assisting small businesses during this challenging time. With input coming in from all directions, it’s pretty easy to get information overload and begin to feel defeated or indecisive. But not to worry! Now is the time to educate yourself on these new programs and how they can help you and your business weather the storm. Today we are going to focus on just one of these relief efforts, the Paycheck Protection Program being offered by the Small Business Association (SBA).
Paycheck Protection Program
Small businesses and nonprofits with 500 or fewer employees are eligible to apply for loans through the Paycheck Protection Program. Businesses who in the hotel or food services industries that are franchises and have more than 500 employees may also be eligible. The Small Business Administration (SBA) will guarantee and offer assurance on loans up to $10 million for those eligible. These loans are also able to be forgiven and will become essentially grants if businesses follow all of the necessary guidelines. The maximum amount that these loans offer is equal to 2.5x your average monthly payroll costs for the previous calendar year, with a cap of $10 million.
These loans can cover the following costs:
- Salary, wages, commissions, and/or tips (the maximum amount is $100,000 per employee)
- Costs of benefits like healthcare or retirement
If your business meets the requirements and follows all of the guidelines, your loan will be forgiven in full. Companies must maintain payroll for 8 weeks at the employee’s normal salary levels after the loan is granted. If you are given one of these loans, be aware that you will need to spend loan funds only on the aforementioned items, and make sure that “if staff numbers are reduced, or salaries for employees who earn less than $100,000 annually are reduced by more than 25%, then the business must repay the loan. Businesses have until June 30, 2020, to restore full-time employment and salary levels that were changed between February 15 and April 26” (Forbes).
Although many lenders and banks were immediately inundated with demand for this new program, congress and the Federal Reserve are working to make these loans accessible to all businesses who might benefit from them. Worldwide Capital Management is here to help you and your business survive and thrive through these times. Give us a call today to see what we can do to ride out the volatile market. More information on the Paycheck Protection Program can also be found here.