A new $484 billion stimulus package has passed
both the U.S. House of Representatives and the Senate and is expected to be
promptly signed into law by the President.
This package includes more money for struggling
small businesses through the Small Business Administration’s Paycheck
Protection Program, $310 billion more, to be exact. The program’s original $350
billion in funding ran out in mid-April, just weeks after being released.
For businesses caught flat-footed when money from
the CARES Act ran out, being ready for this next release of stimulus funds is
imperative. Cary Hegreberg, President and CEO of the Montana Bankers
Association says not much has changed with the second iteration of PPP funding.
“We worked really hard to make sure they didn’t
change the rules,” Hegreberg said. “There is some money set aside for smaller
lenders to make sure they don’t get left out and money for disadvantaged small
businesses, but it’s pretty much the same program that was announced
Hegreberg said that means businesses can prepare
to apply for a PPP loan by working with their banker. Many banks are already
set up to help customers apply for a PPP loan. If they are not, Hegreberg says
they can offer a referral to a bank that can help businesses apply. But don’t
wait to call your bank to find out if they can help you. Pick up the phone
right away and start the conversation.
To find what documents a business needs to apply for a PPP loan, Cary says sba.gov is the best source of information. Since PPP loans are forgivable if the business follows certain guidelines, it’s important that loan seekers research and understand exactly what is expected of them.
“This isn’t just signing on the dotted line and
you’ll get your money,” Hegreberg said. “Your bank will tell you what you need,
and the SBA does a good job of laying out the criteria and what the terms are.
But the key thing is to know what you’re signing up for. There is criteria that
has to be met.”
As a reminder, the Paycheck Protection Program is a
loan designed to incentivize small businesses keeping their workers on the
payroll during these uncertain times. The SBA says it will forgive loans if all
employees are kept on the payroll for eight weeks and the money is used for
payroll, rent, mortgage interest, or utilities. Because PPP is an extension of
the SBA’s 7(a) loan program, businesses must apply through a banking institution
that is already set up to process 7(a) loans or another regulated lender that
has been newly approved and enrolled in the program.
According to U.S.
Treasury, a PPP loan can be applied to the following payroll costs:
· Salary, wages, commissions, or
tips (capped at $100,000 on an annualized basis for each employee).
· Employee benefits including
costs for vacation, parental, family, medical, or sick leave; allowance for
separation or dismissal; payments required for the provisions of group health care
benefits including insurance premiums; and payment of any retirement benefit.
· State and local taxes assessed
· For a sole proprietor or
independent contractor: wages, commissions, income, or net earnings from
self-employment, capped at $100,000 on an annualized basis for each employee.
In addition to
covering payroll costs and benefits, businesses can use PPP loans for:
· Interest on mortgage
obligations, incurred before February 15, 2020.
· Rent, under lease agreements
in force before February 15, 2020.
· Utilities, for which service
began before February 15, 2020.
Information on how
much loan money a business can apply for and what amount is forgivable can be
found here. PPP loans have a 1% interest
rate. Although loan payments are deferred for six months, the loan term is two
As a general rule,
businesses – including nonprofits, veterans’ organizations, Tribal business
concerns, sole proprietorships, self-employed individuals, and independent
contractors – with 500 or fewer employees can apply. Businesses with more than
500 employees will be allowed to apply if they meet certain “size standards” by
industry, at the discretion of the SBA.
Of the $310 billion of new PPP money, $60 billion is set
aside for smaller financial institutions, like community banks and credit
unions. Also in the $484 billion package is money for hospitals and coronavirus
If the first round of funding was any indication, this
renewed PPP pot of money could go quickly as well. As the experts advise, get
your payroll documents in order, talk to your banker, and keep a close eye on
“Our impression is
that as soon as the president signs it, the funding will become available
almost immediately,” Hegreberg said. “Be ready.”
PPP loan information as well as a FAQ section is
available from the SBA here.