The United States federal government passed a coronavirus relief bill that is aimed at supporting small businesses (YES, NONPROFITS!) through this difficult time. One of the essential measures in the bill is the Paycheck Protection Program. You'll find some helpful information below.
What Is The Paycheck Protection Program And How Does It Help Nonprofits?
The recently launched Paycheck Protection Program is part of the CARES Act. This is an approximately $350-billion program intended to provide American small businesses with eight weeks of cash-flow assistance. This assistance is through 100 percent federally guaranteed loans.
You can read the bill in its entirety HERE.
Paycheck Protection Program Highlights
- All small businesses are eligible (Nonprofits!)
- The loan's maturity rate is 2 years and the interest rate is 0.5%
- No loan payments due for the first six months
- No collateral or personal guarantees required
- No fees
- The loan is for expenses dating back to February 15, 2020, through June 30, 2020
- The loan can be forgiven and turn into a non-taxable grant
Who Qualifies For The Paycheck Protection Program?
Nonprofits, small businesses, sole proprietorships, independent contractors, and self-employed individuals can qualify.
What Can The Funds Be Used For?
The funds must be used to retain employees and maintain payroll. Funds can also be used to make your mortgage payments, lease payments, and pay for utilities. The funds can be used for:
- Commission payments
- Group health care benefits
- Insurance premiums
- Mortgage interest payments
- Rent and lease payments
- All Utilities
- Interest on other debt obligations that were incurred before the covered period
How Much Funding Can I Receive From This Program?
The maximum amount you may receive from your SBA-approved lender is based on your monthly average payroll costs in 2019, multiplied by 2.5, up to a maximum of $10 million.
How Can I Apply?
Applying is not complicated. You apply for the Paycheck Protection Program through any SBA-approved lender. Remember, the SBA itself doesn't lend you the money; they just "back" the loan that the lender provides. Borrowers can apply for these federally backed loans at the more than 1,800 banks that already offer Small Business Administration loans. The best thing you can do is to reach out to your bank to see if they are offering loans through the Paycheck Protection Program.
All loans will have the same terms regardless of the lender or borrower. There is no cost to apply for this loan. Nonprofits and Sole Proprietorships can apply beginning on April 3, 2020. After that, independent contractors and self-employed individuals can apply starting on April 10, 2020. Apply early! There is a funding cap in place for this program. You have until l June 30 to apply.
Money borrowed from the Paycheck Protection Program will have a 0.5% fixed interest rate. The first payment is deferred for six months.
How Do I Get My Loan Forgiven?
In the eight weeks after your official signing date, all of your expenses related to the list below can be forgiven:
- Payroll - salary, wages, vacation, parental, family, medical or sick leave
- Health Benefits
- Mortgage Interest - on mortgages that were signed before February 15, 2020
- Rent - on lease agreements that were in place before February 15, 2020
- Utilities - as long as your service began before February 15, 2020
It is imperative that you keep excellent and detailed records and have accurate bookkeeping to prove your expenses during the loan period. The lender must decide within 60 days of your forgiveness application submission.
You must keep employees on the payroll or rehire quickly. You must maintain salary levels. Forgiveness is reduced if your full-time headcount declines, or if salaries and wages decrease. You must maintain the same number of full-time equivalent employees as you had during the previous one year period. If you laid off employees or decreased wages, you will not be penalized so long as you rehire employees or restore wages by June 30, 2020.
The Small Business Administration implements the Paycheck Protection Program with support from the Department of the Treasury.
Pin the image below to keep this article on hand. Read it now or save it for later; find out about the program and the help available for you and your organization.