Paycheck Protection Program: Information for Small Businesses

As you may be aware, the recent CARES Act passed by the government features a variety of initiatives intended to help Americans through the social and financial effects of COVID-19.

In addition to the SBA Disaster Loans already available, part of this new bill is designed to help small businesses and those who are self-employed weather the storm of COVID-19. $367bn will be designated to loans for small businesses, and many tour and activity operators may be eligible to apply for assistance. A key part of this initiative is the Paycheck Protection Program.

We’ve compiled some of the key information below on what the program is and how to apply, as well as some links you may find useful. We’ll continue to update this page with any new information we find.

What is the Paycheck Protection Program (PPP)?

This program is designed to provide small businesses and employees with relief during this period of economic uncertainty. The main function is to enable businesses to retain their employees as well as cover other business costs.

It can be used for payroll, rent, utilities and more. It will be administered by the SBA (Small Business Administration) under its 7(a) lending program, via approved lenders.

How do I know if I’m eligible? 

The program has the following eligibility requirements:

  • You must be a small business (comprised of 500 employees or less), an independent contractor, or self-employed
  • You must have been operational as of 15th February 2020
  • Venture-backed companies where VCs own more than 20% of the business currently do not qualify

What are the terms? 

  • The legislation allows for loans up to $10 million
    • The amount will be up to 250% of your average monthly “payroll costs” (see below) based on the previous year
    • PLUS any refinanced SBA economic injury disaster loan obtained after Jan. 31,  2020
    • There is a special rule to compute the average monthly payroll costs for seasonal businesses
  • Interest rates will not exceed 4%
  • Payments may be deferred for at least 6 months if necessary
  • No collateral or personal guarantee is required to apply

The loan should be used to cover any or all of the following:

  • Payroll costs:
    • Salaries, wages, and vacation
    • Employee commissions and tips
    • Parental, family, medical, or sick leave
    • Severance
    • Retirement benefits
    • Costs related to group health care benefits (i.e., insurance premiums)
  • State or local taxes assessed on compensation
  • Interest on mortgage obligations
  • Rent, including rent under a lease
  • Utilities
  • Interest on other debt, incurred prior to obtaining the loan

Note: PPP loan funds cannot be used to pay salaries over $100,000.

Do I have to repay all of the loan?

  • Anything spent during the 8 weeks from the date of the loan may be forgiven, i.e. won’t need to be repaid, if funds are used to cover payroll costs, interest payments on mortgages (not including principal and prepayments), rent and utilities
  • You can use the loan for business purposes other than the above (e.g. inventory), but this part won’t be forgiven
  • To get the full benefit of loan forgiveness, you must keep your employees and pay them at least 75% percent of their prior-year compensation
  • If a business reduces the number of employees, or reduces salaries, the SBA can reduce the forgiveness by the same percentage
  • If you’ve already laid off staff or reduced salaries below 75%, as long as you reverse these changes by June 30th then your loan can still be forgiven for this 8-week period

Can I still apply if I’ve already applied for an SBA Disaster Loan? 

If you’ve been accepted to receive an SBA Disaster Loan that you applied for on or after January 31st, you won’t be able to apply for a PPP loan to use for the same intended purpose.

However, you will be able to refinance an SBA disaster loan into a PPP loan if you need to. You can do this as soon as the new loans are made available.

How do I apply?

Currently the only loan that you can apply for directly with the SBA is the Disaster Loan. To apply for a PPP loan, you can apply through any SBA-approved lender. This tool on the SBA website can help match you with an appropriate lender in your area. You can also call your local Small Business Development Center or Women’s Business Center and they will provide free assistance and guide you to lenders.

It’s a good idea to reach out to these lenders now, even just to touch base, as things develop and the program is rolled out.

Useful links:

SBA Website

SBA Lender Match Tool

FAQs from US Senate Committee on Small Business and Entrepreneurship

Forbes article – a CPA’s perspective on the paycheck protection program

Skift – What the $2 trillion U.S. stimulus package means for travel businesses