The Paycheck Protection Program, or PPE for short, was established by the SBA as part of the relief effort for small businesses in the country dealing with the repercussions of the COVID-19 epidemic. The program was set in place by the current administration to make sure that businesses can not only maintain vital functions, but keep their employees. It offers loans to small businesses that can be fully forgiven. Let’s take a close look at what the program entails, and if you could benefit from it.
A Closer Look at the PPE Program
The PPE program is a funding initiative that came from the Coronavirus Aid, Relief and Economic Security Act (CARES Act), of which you can find further information via these FAQs from Brown Smith Wallace. It was originally set to be a 350-billion-dollar program aimed at helping businesses with 8 weeks of assistance through federally guaranteed loans. The program was then extended in April and $310 billion in funding was added.
There is now the Paycheck Protection Program Flexibility Act that made the loans easier to repay by adding some additional repayment time, more time to spend the money, and easier forgiveness terms as well.
Am I Eligible?
If you’re a small business with employees and have payroll and cash flow concerns that were raised by the pandemic, then you’re likely eligible for it. Note that you can qualify whether you’re an independent contractor, sole proprietor, or a self-employed individual.
Also, know that the number of employees is not the determining factor to see if you qualify as a small business concern according to the SBA. You can also qualify if you meet the ‘alternative size standards’ set forth by the organization. Once it has been established that you do, you can then decide to apply for the PPP.
One of the important features of the PPP is that it can be fully forgiven depending on how the funds are used. If 60% of the funds are used towards payroll, then the loan will be forgiven in its entirety. However, the remaining 40% has to be spent on vital functions such as utilities, lease and rent payments, and mortgage interest payments.
What Counts as Payroll Costs?
All commissions, wages, bonuses, and hazard pay count as payroll costs under the PPP. Note that these will be capped at $100,000 annually per employee. This means that if you or any of your employees made $140,000 last year, you will need to subtract $40,000 under the PPP’s rules.
Employee benefits like family, parental, vacation, or sick leave count as well. The same goes for payments going towards healthcare benefits or retirement plans.
In short, most payroll expenses will be covered. However, some things will not, like payments made to third party contractors, for instance. C Corps and S Corps owners not on payroll aren’t covered either.
While it might seem complicated at the surface, the SBA has made it as easy as possible for businesses to access PPP loans and apply. So, make sure that you look into it in detail, and consider applying if you’re in need.