On March 27, 2020, the CARES (Coronavirus Aid, Relief, and Economic Security) Act was signed into law. We will be highlighting portions of the Act, and other relief measures, in the coming days that impact our clients and community.
Today we are exploring the Payroll Protection Program. This is a program designed to help small businesses impacted by the coronavirus with a loan based on payroll and with a potential for loan forgiveness. The loan application process varies from bank to bank. Wells Fargo has stopped accepting applications. Most banks are restricting applications to current business customers. Here is a list from Smart Asset on current banks.
Let’s break it down:
Small business – 500 or fewer employees, with exceptions. Employees include full and part time. Sole proprietors and independent contractors qualify.
Loan Amount is either 2.5 times the average amount of monthly payroll or $10 million, whichever is smaller.
Funded through private lenders (local banks) but backed by the government.
Nonrecourse with conditions.
No collateral or personal guarantees required.
Certification required: Uncertain economic climate prompted need for loan, funds for covered expenses, and no other similar loan programs participation.
Length of loan: 10 years with a maximum interest rate of 4%.
Deferment of at least six months of principle and interest.
No prepayment penalty.
Potential for loan forgiveness of a portion of the funds used for payroll, rent, mortgage and/or utilities. Must affirmatively request forgiveness.
452 Government Street, Suite E
Mobile, Alabama 36602