Insight on the Paycheck Protection Program
Expected to be signed into law as part of the $2 trillion economic stimulus package, the Paycheck Protection Program will provide 8 weeks of cash-flow assistance through 100% federally guaranteed loans to small employers (considered to be 500 employees or fewer) who maintain their payroll during the COVID-19 pandemic. If the employer maintains its payroll, then the portion of the loan used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven.
The proposal is retroactive to Feb. 15, 2020 and will extend to June 30, 2020.
The size of the loans would equal 250% of an employer’s average monthly payroll, with the maximum loan amount set at $10 million. Covered payroll costs include salary, wages, and payment of cash tips (up to an annual rate of pay of $100,000); employee group health care benefits, including insurance premiums; retirement contributions; and covered leave.
The loans have a maximum maturity of 10 years and an interest rate that will not exceed 4%. Proceeds may be used to cover payroll, mortgage payments, rent, utilities, and any other debt service requirements. The standard fees imposed under Section 7 of the Small Business Act are waived, and no personal guarantee is required by the business owner.
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