Can the Paycheque Protection Program Help Your Restaurant?
The money is ready to go, officials said.
More details were shared on Tuesday on the $ 349 billion set aside for a new small business loan program. If small businesses, like restaurants, maintain their payroll during the economic downturn, some of the money borrowed through the newly created “Paycheck Protection Program” may be forgiven. Paycheck Protection Program is a Massive Effort – More Than Arizona’s GDP, Says Fortune.
Treasury Secretary Steven Mnuchin and the SBA revealed additional details on Tuesday, with a senior government official adding that it could be possible for millions of loan applications to arrive on Friday when those loans become available. Mnuchin added that they are implementing a same-day loan approval system in which borrowers can receive funds the same day they submit an application. Since the approval process will be fully managed by the lender, there is no separate review conducted by the SBA. But by The Washington Post, companies should not bet on this, knowing that it would be difficult for most banks to achieve this without increasing the risk of fraud. Most small businesses will take days to gather the necessary documents to apply.
Who is eligible? Small businesses (this applies to many, many restaurants. Read to the end.) With fewer than 500 employees can apply for the Paycheck Protection Program. These include non-profit companies, sole proprietorships, self-employed people, independent contractors, and veterans organizations. Borrowers must certify that their business has been affected by COVID-19 and was in business as of February 15. The program has said it will assess the credit scores of business owners, but will not require collateral or personal guarantees. Loans apply to expenses incurred from February 15 to June 30. Loan rates are initially set at 0.5%.
Especially for restaurants, the ceiling of 500 employees applies per physical location.
A key element to consider too: The program includes a loan remission covering the costs of the first eight weeks of the loan for companies able to keep their employees on the payroll or continue to pay bills throughout the COVID-19 pandemic. The loan forgiveness amount will include salary costs for people with an annual income of less than $ 100,000, mortgage and rent obligations, including interest and utility payments. The total amount will be reduced if your company’s workforce is reduced by attrition or if wages are reduced. If the company were forced to lay off employees due to economic conditions, it might be able to preserve some of your loan collateral by rehiring them (this is the circle for many restaurants). At least 75 percent of the canceled costs are expected to come from payroll.
“The loans will be canceled as long as the funds are used to keep employees on the payroll and for certain other expenses,” Mnuchin said. A decision on the cancellation of the Paycheck Protection Program loan will be made within 60 days of the cancellation submission.
The money handed over will be reduced for employers who lay off employees or cut wages by more than 25 percent, Fortune reported. The laid-off employees must be rehired by June 30 for companies to recoup their wages through a loan forgiveness, a senior SBA official told the publication.
Eligibility for loan cancellation begins eight weeks after the loan inception date. This is a maximum term of 10 years after the loan forgiveness request.
What costs are covered by the loans? The new loans will cover salary costs and benefits, mortgage interest incurred before February 15, rent and utilities under leases in effect before February 15, and utilities for which service began before February 2020.
Salary costs include salaries, commissions and tips capped at $ 100,000 for each employee. In addition, benefits for vacation, parental leave, sick leave, medical leave and certain categories of additional and limited benefits. In some cases, they can also cover the interest of other debts.
How much money? The Paycheck Protection Program provides small business loans of up to $ 10 million to cover payroll and certain other expenses, which is 2.5 times the company’s total payroll expenses for the period. ready. The first installment will be due after six months and the replenishment loan after two years.
Disqualification factors: Paycheck Protection Program loans are not available to businesses whose owners (or the business itself) have previously been suspended, excluded, offered for exclusion, declared ineligible, or have been voluntarily excluded from the program. loans by a federal agency, or are currently involved in any bankruptcy. In addition, businesses that have taken out a loan from the SBA that subsequently caused a loss to the government, are currently in arrears, or have resulted in a default, are excluded. It also excludes businesses in which a 20 percent owner is currently a person facing criminal charges or who has previously been convicted or otherwise punished for a felony against a minor.
What to prepare, where to apply. The Washington Post said the program will ask for basic credentials for the company, the company’s TIN number, average monthly payroll, how many jobs the company supports and what you want. specifically use the loan money. The company will also be asked to list any owners who own at least 20% of the company’s equity and say they are not involved in federal crimes. They will be asked to provide documentation regarding the number of employees over time as well as salary costs. Borrowers can apply to over 1,800 banks that already offer Small Business Administration loans (contact your current bank first). There is no charge to apply.