As a part of the CARES Act of 2020, the Paycheck Protection Program (PPP) provides loans to small businesses (generally under 500 employees) that are designed to offer a direct incentive to keep their workers on the payroll. See below for the answers to common questions.
What is my Maximum PPP Loan Amount?
How Can I Use a PPP Loan?
What is the Interest Rate and Term On My Application?
Can My PPP Loan Be Forgiven?
When/How Do I Apply for Loan Forgiveness?
WHAT IS MY MAXIMUM PPP LOAN AMOUNT?
Small business loan applicants are generally eligible to borrow up to a maximum amount that is calculated using a formula that takes the average monthly payroll costs for the most recent 12 month period (calendar year 2019 can also be used) and then multiplies that amount by 2.5.
Payroll costs over 12 months include the following:
- Salary and wages up to a maximum of $100,000 per employee.
- Payments made for vacation, parental, family, medical, or sick leave.
- Payments made for employee benefits such as group health care coverage, employer paid retirement plan contributions, employer paid state and local taxes, and certain other less common costs as outlined in the CARES Act.
HOW CAN I USE A PPP LOAN?
The PPP loan proceeds must be used for the items identified below:
- Payroll and benefit costs as defined above
- Rent or lease payments
- Utility payments
- Mortgage interest payments
- Other less common items as outlined in the CARES Act
WHAT IS THE INTEREST RATE AND TERM ON MY PPP LOAN?
The interest rate will be one percent (1.00%). Loans issued prior to June 5 have a maturity of 2 years. Loans issued after June 5 have a maturity of 5 years.
CAN MY PPP LOAN BE FORGIVEN?
The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 60% of the forgiven amount must have been used for payroll).
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
WHEN/HOW DO I APPLY FOR LOAN FORGIVENESS?
In order to qualify for the EZ application process, you must be an independent contractor, a sole proprietor with no employees, or a business that did not have a reduction in pay or headcount of greater than 25%.
If your business meets this criteria, you are eligible to apply for PPP loan forgiveness right now, and even better, you’ll be able to take advantage of the streamlined EZ application process.
All borrowers interested in applying for loan forgiveness simply have to visit the UMassFive Digital Business Lending Center and follow these steps:
1. Click on "Continue."
2. On the next page, answer the questions shown (enter in either myself, Jeff Simpson, or Dan Thies as the person you are working with here at UMassFive) and then click on "Continue"
3.On the next page, select "PPP Forgiveness" and then click on "Continue."
4. On the next page, select "Sign In Here" and login with the same credentials you used to apply for your PPP loan to get started with the forgiveness application.
If you have additional questions, please reference this short YouTube video that was recorded to assist PPP loan borrowers with the forgiveness application process.
If your business does not meet the criteria for the EZ application, or if you would simply prefer to wait, the good news is there’s no need to rush to apply for forgiveness just yet. In order to understand the deadlines you should be marking in your calendar, you’ll need to reference your PPP Loan funding date, and your elected coverage period. This information can be found by logging into the UMassFive Digital Business Lending Center.
If you selected 8 weeks of coverage, your coverage has likely already ended; if you selected 24 weeks of coverage, you may be at, or fast approaching, the conclusion of your coverage. Fortunately, the end of your coverage does not mean you owe money, or are racing the clock to apply for forgiveness. Once you have the date that your coverage ends marked in your calendar, flip ahead 10 months from that day, and that is your deadline to submit your forgiveness application. That date is also the day that your first payment would be due, so be sure to mark it in red pen, no matter where you stand in the forgiveness application process.