With so many small businesses closed, one of major lifelines that company owners are counting on during the coronavirus pandemic is the $349B forgivable loans that the Federal government approved in the form of the Paycheck Protection Program (PPP).
On the Small Business Radio Show this week, I interviewed Senator Marco Rubio, the Chairman of the Senate Small Business and Entrepreneurship Committee who discusses how small business owners can take part in the Federal Stimulus through this program. He emphasized how this is unlike any other economic downturn since the government, through “sheltering in place”, has effectively shut down many small businesses and has made it impossible for them to operate. He stated that under this situation, the government must help out.
Paycheck Protection Program According to Senator Marco Rubio
Senator Rubio described that this stimulus program was unique since it was designed to be forgiven. The amount of the loan is 2.5 times the average monthly payroll of the small business and will not have to be paid back if 75% of the money is used to retain employees (or to rehire them)
Small business owners can apply for the loans through 800 SBA lenders now or soon through Fintech companies like Kabbage, PayPal and Intuit QuickBooks. The program for companies of less than 500 employees started April 3 and for independent contractors on April 10.
Senator Rubio says these lenders get 5% of the loan amount. That payment goes up to $350K. And then they receive a lesser percentage to process the loans. The federal government guarantees the entire loan. And you see no fee to apply.You also need no collateral. Suppose the loans don’t get forgiven. Interest rates remain at 1 % for the program (up from .5%) after a 6 to 12 month deferral.
Applying for the Loan Program
Senator Rubio doubts the need for a lot of documentation. But it seems SBA lenders require a varying amount. They range from payroll registers to tax returns to leases. Most banks only accept applications from current customers. So what if your bank doesn’t participate in the SBA loan program? You may need to try a Fintech company instead.
Senator Rubio expects more stimulus. Look for it when we get to the recovery part of the year. He also points out a payroll tax credit for all employees. Apply it against your 2020 taxes. But count on it in addition to this. Still prepare for some limits. Your sales need to have gone down 50% to qualify currently.
Listen to the entire interview or read the transcript on the Small Business Radio Show