paycheck and envelope

What Is The Payroll Protection Program?

For small businesses, the most attractive program built into the CARES Act (the federal coronavirus relief package) is the Paycheck Protection Program (PPP). 

PPP is funded to the tune of $349 billion through the Small Business Administration (SBA).

However, the program differs in significant ways from the currently available Economic Injury Disaster Program

First, businesses will apply through individual banks, not the SBA itself.

Second, while technically a loan program, a portion — and potentially all — of the loan can be forgiven, making it act more like a grant. 

About the PPP Program

Eligibility – For-profit businesses with fewer than 500 employees (including hotels and food service businesses that have fewer than 500 employees per location); 501(c)(3) nonprofit organizations; veterans organizations; eligible self-employed individuals; independent contractors; sole proprietorships

Loan amount – The maximum loan size is equivalent to 250% of the employer’s average monthly payroll costs, not to exceed $10 million. Payroll costs are defined broadly to include wages, salaries, retirement contributions, healthcare benefits, covered leave, and other expenses. Put another way, the size of the loan is equal to the cost of payroll for about 10 weeks.

Loan terms – Up to 10 years at 4% with the ability to defer principal and interest payment for between 6 and 12 months. There are no fees, no requirement to secure the debt with collateral, no requirement of a personal guarantee, and no penalty for early payoff.

Loan forgiveness – A portion of the loan (up to 100%) will be forgiven in an amount equal to how much the business actually paid for payroll costs, salaries, benefits, rent, utilities and mortgage interest during the eight weeks following the loan’s disbursement. If employees are laid off or their salaries are reduced there could be a reduction in the amount forgiven. Borrowers will need to apply through their lender for this forgiveness and provide documentation for all costs. Banks will have 60 days to make the determination.

This information provided by the Greater Peoria Economic Development Council.

It’s very important that you contact your banker directly to apply for this program.