Paycheck Protection Program (PPP)

Congress recently passed “The Coronavirus Aid, Relief, and Economic Security Act” (also know as CARES Act), which included the “Paycheck Protection Program” (PPP) for small businesses.

This program gives small businesses access to short-term cash flow assistance aimed to help deal with the immediate global impact caused by the COVID-19 pandemic. These loans are made by approved lenders, certified by the SBA (Small Business Administration) and are guaranteed by the federal government of the United States. These loans are separate from the EIDL (Economic Injury Disaster Loan) program for small business owners and the state economic recovery bridge loans.

A few of the specifics of the PPP loans:

  • Apply through your bank or lender (not the SBA). Your lender or loan officer will provide the application and quide you through the loan process. This process should be streamlined as the intention is to get capital in the hands of small businesses to continue operating.
  • Loans are limited to $10 million or 2.5x the average monthly “payroll” costs measured over the 12 months preceding the loan origination date. Payroll costs can include salaries, commissions, and sole proprietor compensation.
  • Rate is not to exceed 4% and the term will be 10 years. The first loan payment will not be due for at least six months after the loan origination date.
  • No collateral or personal guarantees required.
  • There will be a formula to calculate a portion of the loan that qualifies for foregiveness using certain payroll costs, rent, interest on mortgages and utilities.
  • Qualifying businesses must have been in operation on February 15, 2020 and have less than 500 employees (with some exceptions). Sole proprietors, single member LLCs and independent contractors should qualify for the program.

Some of the items you might need for the loan application:

  • 2019 Profit and Loss or 2019 Business Tax Return
  • Most recent four quarters payroll tax returns
  • Verification of the number of employees and payroll incurred over the most recent twelve month period

We expect more details to come from lenders and the SBA in the upcoming days. CT DECD has posted a small business owners guide to the programs with more information.