Covid-19 Financial Resources

Paycheck Protection Program

How It Can Benefit Your Business

What is it?

The Paycheck Protection Program (PPP) is a provision under the newly enacted CARE Act that provides up to $349 billion to be used as forgivable loans to small businesses struggling due to the current COIVD-19 disaster.

Approved small businesses will receive enough financial aid to pay for up to 8 weeks of payroll costs which can include wages, benefits, commissions, and tips, with the per employee amount capped at $100,000 annually. The loan may also be used to pay interest on mortgages (incurred before 2/15/20), rent (under agreement before 2/15/20), and utilities (with a service start date before 2/15/20).

Am I eligible?

As a REALTOR®, team, brokerage, or franchise, one of the first questions you’ll have is ‘Does this apply to me?’

Among other types, small businesses and Tribal businesses along with those who are self-employed or independent contractors are usually eligible, as long as the business has been in operation since February 15th, 2020.

How is a Small Business defined?

While there is no broad definition for what makes a business small, the SBA’s size standards are mostly based on the average annual receipts or the average number of employees.

Real Estate, Rental, and Leasing businesses, however, do not have an employee restriction. These types of businesses usually only have to make no more than $7.5 to $32.5 million for their average annual receipts.

If you have any questions regarding what size standard your business fits, more information can be obtained from your nearest SBA Government Contracting Area Office. You can also contact the Office of Size Standards.

How much will I receive?

If approved for a loan through the Paycheck Protection Program (PPP), your business would receive 2.5 times your total payroll expenses for the duration of the loan, up to $10 million. The loans mature after 2 years with an interest rate of 1%. However, due to the CARE Act setting the interest rate cap at 4%, it’s possible the rate may increase down the road.

Loan payments are being deferred for the first 6 months with no collateral or personal guarantees required, and there are also no fees being charged by the lenders, per the CARE Acts’ stipulations.

What if I already have an Economic Injury Disaster Loan or PPP loan?

Businesses who may already have another type of EIDL from the SBA can still apply to receive an additional loan under the PPP, but only if the loans are not for the same purpose. A business cannot receive a loan from both the SBA’s EIDL Emergency Advance and the PPP for COVID-19 disaster-related financial hardship. A business cannot be approved for two PPP loans under any circumstances.

What are the criteria for loan forgiveness?

A loan under the Paycheck Protection Program is only eligible for forgiveness as long as it can be proven that at least 75% of the total amount was used for one or multiple of the below:

  • Interest on mortgages, begun prior to 2/1520
  • Rent, begun prior to 2/1520
  • Utilities, begun prior to 2/1520
  • Payroll costs

Payroll costs for small businesses can include the below:

  • Salary, wages, commissions, or tips, up to $100,000 per employee
  • Benefits such as vacation, parental, family, medical, or sick leave
  • State and local taxes

Payroll costs for self-employed individuals or independent contractors can include the below: 

  • Wages, commissions, income, or net earnings, up to $100,000

The PPP’s loan forgiveness is also based on the business retaining its employees and their salary amounts. The total loan amount that will be forgiven can be reduced based on any changes the business makes in regards to its employees, if those changes are not financially beneficial to them.

How do I request loan forgiveness?

A business requesting their PPP loan to be forgiven must submit their request in writing to the lender that provided them with the funds. The below items must also accompany the loan forgiveness request as well:

  • Number of full-time employees and their individual salaries
  • Documentation on the payments for any applicable mortgages, leases, and/or utilities

The lender will review the certified information and provide the borrower with the decision within 60 days. 

Where do I apply?

Small businesses and sole proprietorships can begin applying now. On April 10, 2020, independent contractors and self-employed individuals will also be able to apply. The program ends on June 30th, 2020, so time is of the essence.

Any businesses, contractors, or self-employed individuals will need to fill out this SBA form and bring it with them to consult an SBA 7(a) lender or when requesting a loan suing any federally insured depository institution, federally insured credit union, or Farm Credit System institution that is participating in the PPP. 

If you’re unsure whether your regular lending institution is participating, reach out to them directly. You may also use the SBA’s online tool here to find an approved lender near you.

Where do I find more information?

The SBA has more information on the Paycheck Protection Program (PPP) on their website here.

The U.S. Department of Treasury has a program overview here as well as a Fact Sheet here.

All information in this article was sourced from the SBA and U.S. Department of Treasury's overviews.