The Coronavirus Aid, Relief and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program (PPP), the initiative provides 100% federally guaranteed loans to small businesses.
Businesses should decide whether they would like to apply for the Payroll Protection Plan (PPP) or the Economic Injury Disaster Loan (EIDL) or both. There is an overview below.
Each business needs to keep detailed records of how they spend the money in order to have all or a portion of the loan forgiven (turned into a grant).
Payroll Protection Plan- There is an overview attached, but basically this is a 2 year, 1% interest loan to cover payroll and rent for 8 weeks. If criteria is met on spending, this loan will turn into a grant and be forgiven.
The intent with this program is to help businesses keep their people on payroll and be ready to open as soon as possible. They can apply for 2.5 times their monthly payroll, and they must spend 75% on payroll and 25% on rent, mortgage interest, or utilities. To meet the forgiveness criteria, they need to be back to full payroll numbers by June 30th. To apply, they complete the attached application and take it to their local participating bank.
Economic Injury Disaster Loan- This is the more traditional SBA loan. The piece that is different is that businesses may apply for up to a $10,000 loan advance that will not have to be repaid. This is to help with immediate needs. With this program, businesses can apply for a larger amount and use it on a larger variety of things, but it does have to be repaid (other than the loan advance).
Businesses may apply here This will start the process for the EIDL loan.
Businesses may apply for both loans, but they cannot get both the PPP and the loan advance amounts forgiven. My understanding is only one of them will be forgiven. If you apply for both, they are rolled together. Again, the important thing is to keep detailed records of how the money is spent.
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