The U.S. House and Senate have passed a historic $2.2 trillion stimulus package which is expected to be signed by the President at any moment.
A provision of the bill known as the Paycheck Protection Program is particularly beneficial to small businesses. The bill aims to encourage impacted small and medium-sized businesses with 500 employees or less to continue paying workers and providing benefits throughout the economic crisis. The program offers partially forgivable loans for short-term operating expenses to cover costs like rent, mortgage, wages, salaries, retirement contributions, healthcare benefits, and covered leave.
The program includes a number of advantageous features for borrowers, including a streamlined application, six months to one year of deferred repayment, and certain fee waivers. The maximum loan size is equivalent to the lesser of either $10 million or 250 percent of the employer’s average monthly payroll costs (approximately 10 weeks of payroll expenses).
One of the most appealing benefits is that borrowers are eligible for loan forgiveness equivalent to the sum spent on covered expenses during the eight-week period after the loan is originated. The forgivable nature of these loans makes them operate more like grants, such that qualifying businesses will not see a significant increase in their debt burdens.
To qualify for forgiveness, employers must maintain their pre-crisis level of full time equivalent employees or face a reduction in forgiveness proportional to the reduction in workforce. Since many businesses have already been forced to make staffing reductions, the program allows businesses to qualify for loan forgiveness if they have re-hired their workforce back to pre-crisis levels by June 30, 2020.
If you have questions about the forgoing, please feel free to contact us.