Remember to be forgiven: follow these steps to turn your PPP loan into a grant
Written by Franck Lopez
As the coronavirus rages on, creating economic uncertainty, the federal government has tried to soften the blow with loans and protections for employees.
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was unanimously passed by the Senate and enacted by President Trump in late March, providing $ 1.8 trillion in direct aid to individuals and to businesses.
With so many businesses shutting down temporarily, cutting back on operations, or putting employees on leave, the Paycheck Protection Program (PPP) has caused many business owners to rush to apply for the US-administered forgivable loans. Small Business Administration. (SBA).
On April 24, Trump signed a $ 484 billion COVID-19 rescue bill, which included $ 310 billion in new money.
The White House announced that since May 3, 2.2 million small business loans worth $ 175 billion have been loaned in the second round of PPP funding.
PPP loans will be canceled entirely if the funds are used for salary costs, rent, mortgage interest and utilities. At least 75% of the amount remitted must be used for payroll, the remainder being spent on other expenses.
In order to provide a safety cushion for normal consumer operations, loan repayments will be deferred for six months. Collateral or personal guarantees are not required and neither the government nor lenders will charge small businesses a fee.
“It’s important for businesses to know that the PPP along with the Economic Disaster Lending (EIDL) program helps borrowers get capital now and have time – six months for PPP and 12 months. for EIDL – before any payment is made. done, said Dawn Golik, SBA district manager for Fresno. “This gives the borrowers capital that is trying to stabilize and start to recover, and at that point they would start paying off the loan.”
The EIDL is a loan of up to $ 2 million, with a term of up to 30 years, designed to help businesses navigate difficult times caused by disaster, such as the current pandemic. The specific loans, however, will depend on the amount of economic damage suffered by a business.
Golik said it’s also important to note that businesses may want to maximize the amount of loan cancellation they can receive, and with a 1% interest rate, repayment is affordable for businesses that have a balance to repay.
PPP loans must be repaid within two years from the date of their distribution.
“The SBA greatly appreciates the local lenders who have stepped up to help businesses during this very difficult time,” Golik said. “We have had huge interest from our community of lenders around Kings County, the San Joaquin Valley and the Central Coast region to use the P3 program to help small businesses, and we have added many PPP lenders from their local lending community. “
AT Streamline CPA Accountancy Corp. located in downtown Fresno, Adam Blitz, founder and CPA of the firm, has now said that many companies have received PPP loans, his biggest concern now is advising his clients on how to get the cancellation loans, especially with new legislation and the situation changing every day.
Blitz said he’s been on the phone with his customers all day discussing how they’re supposed to spend their money, as well as receiving countless emails and texts from customers asking for help on how to use the loans.
Most of Blitz’s clients were excluded from the first round of funding, he said, but 95% of his clients received funds in the second round.
Blitz said this pandemic could turn out to be a final spectacle for some of its customers, and that they need to consider where businesses might go from this point on.
“I’ve seen clients where it’s a bridge towards the end,” Blitz said. “They probably shouldn’t even take the money and run away. For some clients, if they take their money out and pay their employees, what do they have in the end? If that doesn’t pick up, especially in the restaurant and entertainment industry, I find it hard to see them as viable businesses in the short term. “
Blitz said he had heard that clients were not using PPP funding for payroll and were using it to fund other business operations to survive because it didn’t make sense for them to pay. employees sitting at home.
“Just because you can get that funding doesn’t mean it’s fair. If you get this loan it means you can’t get the employee loyalty credit, and maybe in your scenario it was a better opportunity than a P3 loan.