The Treasury Department today issued much-anticipated guidance (attached) for the Paycheck Protection Program, which starting this week will provide up to $350 billion in fully forgivable loans to help small businesses maintain payrolls during the coronavirus pandemic. Banks will be able to begin accepting the applications for these loans on April 3rd.
There are two main programs that are beneficial to small businesses, however, you must choose only one of them. You are not allowed to receive both the tax credit and SBA loan listed below.
Paycheck Protection Program (PPP)—SBA Loan
An SBA loan that helps businesses keep their workforce employed during the COVID-19 crisis. The amount of the loan will be based upon your 2019 average monthly payroll x 2.5 (excluding salaries above $100,00).
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 75% of the forgiven amount must have been used for payroll. Loan payments will also be deferred for six months. No collateral or personal guarantees are required. 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 decreased.
The Paycheck Protection Program will be available through June 30, 2020. Lenders are able to begin processing the applications as soon as April 3, 2020.
Employee Retention Credit
This program provides a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID-19 crisis. The credit is available to those whose operations have been fully or partially suspended as well as those who have experienced greater than 50% reduction in quarterly receipts, measured on a year-over-year basis.
The credit is capped for the first $10,000 in wages paid by the employer to an eligible employee.
The credit applies to wages paid after March 12, 2020 and before January 1, 2021.