Everything You Must Know About the Paycheck Protection Program

The pandemic has done its best to bring America to its knees. We can see this in the way it has worsened political divides, created a housing crisis and is preventing many schools from functioning normally this fall semester. However, the federal government has tried to put certain programs in place to help during these difficult times.

Writing paycheck

The Paycheck Protection Program is right at the top of that list. If you’re a business operator or owner, then you need to know all about it, since it might be part of what’s keeping you running in 2020.

Let’s go over some program details right now.

What is the Paycheck Protection Program?

There are many Paycheck Protection Program services, of which you should be aware. It is:

  • A $669billiondollar business loan program
  • Established through the 2020 US Federal Government Coronavirus Aid, Relief, and Economic Security Act

It is a series of small business loans designed to provide an incentive for many different at-risk companies. It’s mainly for small businesses, though some larger ones have taken advantage of it as well.

The idea is for you to get one of these loans to keep your workers on the payroll. You don’t have to let them go this way, and the economy keeps rolling.

Some More Details About These Loans

The SBA will forgive these loans if the businesses that accept them meet and continue meeting certain criteria. You can only use the funds for eligible expenses. These loans:

  • Have a 1% interest rate
  • Have a 2-year maturity rate if you got one before June 5th
  • Have a 5-year maturity rate if you got one after June 5th

The federal government is also deferring loan payments for the first six months. You do not need to make a personal guarantee or put up any collateral. Lenders and the government will not charge any hidden fees for the small businesses that apply.

This is a unique loan program, but these are unprecedented times. With so many businesses struggling, this was one of the federal government’s answers to stop the bleeding.

What About Loan Forgiveness?

Loan forgiveness is possible as long as you continue to meet the requirements. If you rehire lost workers quickly or maintain your current staff, that’s the most critical detail. You also need to keep their salary levels. This is only fair since you shouldn’t expect to cut worker salaries just because there’s a pandemic.

The government will reduce forgiveness, though, if you lower salaries or cut some workers. If you care about your employees, you wouldn’t even consider this, but that’s a critical provision to have in place just in case some businesses might think about trying it.

Who Can Apply?

The Small Business Administration has come up with a detailed list of who can and can’t apply for these loans. Here are some of the most critical bullet points of which you should be aware.

You have to be a small enough business that you meet the SBA standard. You can also apply if you are an independent contractor, a self-employed person, or a sole proprietor.

This might lead to a little bit of confusion since the program has turned down some self-employed individuals. If you’re not entirely sure whether you are eligible, though, you can always reach out to the SBA.

They’re also giving special considerations to veteran organizations and tribal entities.

Whether or Not to Apply for A PPP Loan

If you’re on the fence about whether or not to apply for one of these loans, then you’ll need to take a careful look at your finances and determine whether your small business is in enough trouble that this option makes sense for you.

Some small businesses, if they’re just a single location or a couple of locations, might feel like this is the only way they can stay afloat without closing their doors for good. If you maintain any online presence, then you might not feel the current economic conditions in such a pressing way.

A lot will depend on your business model. If you’re in desperate straits, then this may be the life preserver you need to keep your cherished business from going under for the last time.

Some businesses might elect not to go this route, and to close for the time being. If you decide to do that, though, it’s far from certain whether you will ever open back up again once the pandemic dies down.

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