If you’ve made it this far that means you can use some free money for your small business. So let’s jump in...
We are in unprecedented times with the COVID-19 pandemic. It is no secret that many small businesses and self-employed individuals are in need of a life line. Congress as of today April 24, 2020 passed a $484 billion aid package that will increase funding for small business through the SBA Paycheck Protection Program. The original funding of $349 billion was quickly depleted in less than 2 weeks and unfortunately many small businesses in need were unable to gain access to funds.
The SBA will resume accepting applications for the program on Monday April 27, 2020. Loans can be applied for through an approved SBA lender. It has been found that the process is far smoother and efficient if you apply through a bank you have an established relationship with.
Here are three steps to ensure that your loan is forgivable:
1. Use Funds Received only for Payroll or approved expenses such as Rent or utilities
The requirement for the loan amount requested is that it covers 2.5 months worth of payroll and excludes compensation for employees over an annual salary of $100,000. Note that 75% of the borrowed amount must be used towards payroll, the other 25% may be allocated towards rent, mortgage or utilities.
2. Maintain your current payroll headcount
This one is just as important as the last. The bill was passed as a stimulus to help businesses maintain employees without laying off people. For your loan to be forgiven, your business must maintain current payroll headcount/salary levels or hire more employees. If your payroll decreases so will the forgivable amount.
3. Follow steps 1 and 2 for 8 weeks beginning the day you receive the loan disbursement
According to guidance from the SBA the amount of your loan forgivable is directly related to your payroll costs over 8 weeks beginning the date you receive the loan. It is important that you take account
of payroll costs over this period and use amounts not used for payroll towards rent and utilities (not to exceed 25% of the loan amount).
To learn more about the Payroll Protection Program head to the SBA website https://www.sba.gov/sites/default/files/2020-04/Paycheck-Protection-Program-Frequently-Asked-Questions_04%2024%2020.pdf
Need an accountant to assist you through the process? talk to us.