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Is your business taking full advantage of the financial help offered under the federal CARES Act? In these unprecedented times, both employers and employees need as much help as they can get. Read on for the full array of benefits available to you.

What is the Paycheck Protection Program (PPP)?

The Paycheck Protection Program was established by the CARES Act and is implemented by the Small Business Administration (SBA) and the Department of the Treasury. The PPP provides small businesses with funds to pay up to 8 weeks of payroll costs, including benefits.

The purpose of the PPP is to provide incentives to employers to continue to pay employees. Up to eight weeks’ worth of certain payroll expenses can be forgiven if employers retain their employees at the pre-pandemic rate of pay for that period.

The PPP also waives all of the usual SBA loan fees and defers loan repayments for a minimum of six months up to a maximum of one year.

Who is Eligible for PPP Loans?

Under the CARES Act, all 501(c)(3) nonprofits, 501(c)(19) veterans organizations, tribal businesses with fewer than 500 employees, individuals who manage a sole proprietorship, and independent contractors are eligible for a Paycheck Protection Loan.

How are PPP Loans Calculated?

Payroll expenses used to calculate PPP loan amounts include:

  • Employee compensation 
  • Any payments made for vacation time or family, medical, or sick leave
  • Allowance or severance in the case of employee dismissal or separation
  • Premiums for employer-provided group health-care benefits
  • Employee retirement benefits
  • State and local taxes on employees’ compensation

What Can a PPP Loan be Used to Pay?

An eligible small business or contractor may use PPP funds for:

  • Payroll costs
  • Costs of insurance premiums for group health-care benefits during periods of paid sick, medical, or family leave
  • Employees’ compensation
  • Payments of interest on any mortgage obligations of the business
  • Rent 
  • Utilities

How Much of a PPP Loan Will Be Forgiven?

The SBA will fully forgive all loans under the PPP provided that:

  • The PPP loan was used exclusively for permitted purposes;
  • The PPP loan was used to pay no more than eight weeks of payroll;
  • The business taking the PPP loan continued to pay employees at the pre-pandemic rate of compensation.

To have the PPP loan forgiven, the borrowing business must contact their lender and submit an application with supporting documentation.

The application period for PPP expired at the end of June 2020. Why do I need to know about it now?

The economy is not going to recover any time soon due to the continuing influence of the pandemic. The federal government is crafting and debating additional legislation that will either extend current programs like PPP or initiate new programs to take their place.

If your small business did not take advantage of PPP when it was first offered, when new legislation passes, you’d be well-advised to apply for assistance if you are eligible. There is no end to this economic downturn insight, and you must do what you can to keep your business afloat in the meantime. Take advantage of the governmental help offered to give your business and your employees the best chance of riding this crisis out.

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Veronica Baxter

Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with David Offen, Esq., a busy bankruptcy lawyer in Abington, PA.

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