US Government Payroll Loans- Too good to be true?

We’ve heard from many of our small to medium-sized businesses during this very trying economic times and can appreciate the anxiety of our small to medium-sized businesses during this very unprecedented times. As we continue to check in with our current clients and hear from new clients, one of their most pressing concerns is how they’re going to meet their payroll expenses over the next few weeks.With the massive stimulus package that was passed by Congress and signed into law by the President, The Paycheck Protection Program was created specifically help employers meet their payroll expenses.

Who qualifies for The Paycheck Protection Program?
Quite simply- any small business with less than 500 employees. This is an S, Corp, a C Corp, LLC, sole proprietorship or even independent contractors. All that needs to be shown is that the business has been negatively impacted by this calamity and the business will struggle to meet its payroll expense over the next couple of months.

How much is available?
Each loan is based on payroll costs and the amount a business can receive is based on 2 1/2 times its average monthly payroll costs. So if a business has a monthly payroll cost of $10,000, then that business would qualify for a loan of about $25,000.
What is the interest rate?
The bill allows for a maximum of 4% but right now, the US Treasury is putting the rate at 0.5%. Crazy huh? It’s basically an interest-free loan.
What are the terms?
The treasury guidance is two years and payments are deferred for the first six months. Also, no collateral or personal guarantees are necessary.


Is there a chance of loan forgiveness?


This is where it gets tricky and a bit complicated. Bottom line- loan forgiveness can be possible with this program. It’s based on how the business spends the proceeds of the loans on qualifying expenses over the next eight weeks. Qualifying expenses included payroll costs, rent, interest on mortgage debt and utilities. Our firm would be happy to counsel you on the provisions of this part of the program.


Where can I apply?


Any business may apply through any existing SBA lender or through any federally insured depository institution. We’re advising our clients to apply sooner rather than later. Bank of America announced they’ve taken 85,000 applications totaling $22 billion-just on Friday, April 4th. There is only $349 billion available, so you’ll need to gather your payroll documentation quickly to submit your application to your bank.


Shipman & Wright can help advise and counsel how your business can navigate these trying times.