The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program, the initiative provides 100%federally guaranteed loans to small businesses.
Importantly, these loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward. The administration soon will release more details including the list of lenders offering loans under the program. In the meantime, the U.S.Chamber of Commerce has issued this checklist to help small businesses and self-employed individuals prepare to file for a loan. Click here to access CARES Emergency Loan Checklist.
A business is eligible to apply if:
- A small business with fewer than 500 employees
- A small business that otherwise meets the SBA’s size standard
- A 501(c)(3) with fewer than 500 employees
- An individual who operates as a sole proprietor
- An individual who operates as an independent contractor
- An individual who is self-employed who regularly carries on any trade or business
- A Tribal business concern that meets the SBA size standard
- A 501(c)(19) Veterans Organization that meets the SBA size standard
Lenders will be evaluating applications eligibility, based on whether the borrower was in operation before February 15, 2020 and had employees for whom they paid salaries and payroll taxes or paid independent contractors.
Lenders will NOT look for
- A personal guarantee to secure the loan.
- Collateral to secure he loan.
- The borrower efforts to secure credit elsewhere.
Loans can be up to 2.5 x the borrower’s average monthly payroll costs, not to exceed $10 million. Borrowers are eligible for loan forgiveness equal to the amount the borrower spent on designated items during the 8-week period beginning on the date of the origination of the loan.