What Small Businesses Need to Know about the Coronavirus Stimulus Legislation

by Alfredo Ortiz

Small businesses are on the front lines of the economy, and they are among the biggest casualties of the coronavirus pandemic. Fortunately, President Trump signed a $2 trillion stimulus bill last week to provide relief to these job creators. The Paycheck Protection Program (PPP) offers small businesses $349 billion worth of forgivable loans to cover payroll, rent, and utilities for the next two months. The loans turn into grants to the extent that employers maintain staffing and employee compensation. Small business owners can apply for loans starting Friday, April 3rd here. Below are the top 6 details the country’s 30 million small business owners need to know about the PPP.

1. These forgivable loans are available to all types of small businesses with fewer than 500 employees, including partnerships, nonprofits, sole proprietors, and gig workers. There’s also an exception for restaurants and hotels with more than 500 employees so long as they don’t have “more than 500 employees per physical location.”

2. Loans can be for up to two months of average monthly payroll costs from the last year plus an additional 25% of that amount (excluding employee compensation above $100,000) up to a maximum payout of $10 million. These funds can be used to pay for most employers’ costs, including payroll, rent, and utilities.

3. These forgivable loans can be obtained through most major financial institutions, which are part of the Small Business Administration’s 7(a) program. Employers need not contend with special bureaucracy to receive these forgivable loans, which are guaranteed by the federal government through the end of this year.

4. These forgivable loans are meant to be simple and easy to access, without extensive paperwork, the traditional “credit elsewhere” requirement, or proof of specific hardship. The legislation requires only a “good faith” understanding that the coronavirus-induced economic crisis makes the forgivable loan necessary and that the funds will be used to “maintain payroll” and operations.

5. The amount of loan forgiveness is dependent on maintaining staffing and employee compensation based on a reference period prior to the loan period. At least 75% of the forgiven amount must have been used for payroll. The legislation offers a forgiveness exemption if recently laid-off employees are rehired by June 30th, 2020.

6. Economic Injury Disaster Loans, which many small businesses have already taken out before last week’s stimulus was passed, can be refinanced into a PPP forgivable loan. As long as employers do not duplicate the purposes for the funding and subtract other EIDL grant awards, they can refinance their EIDL loans for forgiveness purposes.

Alfredo Ortiz is president and CEO of the Job Creators Network.