Small Business Payroll-Loan Application Period Begins
By Angélica Serrano-Román
SAN JUAN — Starting Friday, owners of small- to medium-sized enterprises (SMEs) will be able to apply for a loan to cover payroll costs, as well as other expenses, as provided in the federal stimulus law that allocates $349 billion to help businesses affected by the COVID-19 pandemic.
The measure, which was enacted March 27 by President Donald Trump, provides up to $2.2 billion to inject into the economy in various ways to mitigate the impact that social distancing measures and the closure of businesses are having across the nation.
The SME benefit is available to businesses with fewer than 500 employees, non-profit organizations, or affected veterans organizations, over an eight-week period. The Paycheck Protection program will be available until June 30, 2020.
According to guidelines published by the SBA, businesses can apply for a loan that covers two months of a company’s payroll, plus 25% of that amount. However, the maximum loan amount is $10 million and payroll costs will be limited to $100,000 per employee per year. The SBA said the loan has a fixed interest rate of 0.5% and a maturity of two years.
Here are answers to the most common questions.
What are the requirements?
The requirements to obtain this loan are:
—Being a small business (including DBA, independent contractors and self-employed)
—Have fewer than 500 employees
—Keep your employees under the same salary and number of hours.
—If employees were laid off, employers will have until June 30 to rehire their full-time employees with no change in salary.
—Businesses in certain industries may have more than 500 employees if they meet SBA standards for those industries. If it is a seasonal or new business, different time periods will be used.
Is my business considered small?
The number of employees is not the only factor to be considered a small business and receive SBA assistance. This may vary by industry. Check the list the agency published.
How many loans can I apply for?
You can only apply for a loan. However, small businesses in the lodging and food services industries with more than one location may be eligible if fewer than 500 people are employed. Therefore, each location could be eligible.
What can I use the funds for?
You loan can be used to cover payroll costs, insurance premiums and group health care benefits, employee compensation, payment of interest on mortgage obligations, rent, utilities and interest on debt incurred before Feb. 15, 2020. However, at least 75% must be to cover payroll.
Loan payments will also be deferred for six months. The loan can be up to the total monthly payroll for two months, plus 25% of that additional amount. Although a personal guarantee is not required, the United States government can bring criminal charges if fraud is committed.
How much will be forgiven?
That amount equal to expenses for payroll, utilities, and rent or mortgage interest, during the eight-week period after the loan is granted may be forgiven. The remaining balance will be amortized over a period of up to 10 years. However, the first payment will be deferred for 12 months.
For the payment to be forgiven, the company must have kept the same number of employees and the same compensation. In other words, the SBA will forgive loans if all employees remain on payroll for eight weeks and the money is used for covered expenses.
What is considered a payroll cost?
—Salaries, commissions or tips up to $100,000 annually for each employee
—Employee benefits (vacation, medical or sick leave)
—Local and state taxes in compensation
—For “DBA” and independent contractors: salary or commissions up to $100,000 annually for each employee
What happens if I reduce the hours of my employees?
Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
Where and how can I apply for this loan?
So far, one can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating.
The application with the required documentation must be submitted before June 30. You will need to include the payroll information. Employers who have small companies or are DBA may apply for the loan starting Friday. In the case of contractors and independent workers, after April 10. Other employers may request the loans as soon as they are approved and enrolled in the program. Download the application here.
When can I apply?
The loan application period began Friday. Independent contractors and self-employed individuals with employees will be able to apply beginning April 10.
What you will have to certify:
—Economic need due to the uncertainty caused by the emergency
—Certify that the funds will be used to keep employees and make the determined payments
—Assure that no other loan has been received or will be received under this program
—Evidence of the number of employees, the total income, the interest you will pay, among others
—Certify that the information provided is accurate
Visit SBA.gov/Coronavirus for more information.