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CARES Act: Paycheck Protection Program (PPP)

Financial Planning Credit

A 30-second read by the Baron Team:  The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides additional relief for small businesses with the Paycheck Protection Program (PPP).  The initial program, first signed into law on March 27th, stopped accepting applications in mid-April due to a depletion of the original allocated funds.  As of Monday, April 27th, the federal PPP, through the Small Business Administration (SBA), started accepting new applications.  If you applied for funding in the first round, you will remain in the queue and do not need to apply again.  For more information go to the U.S. Small Business Administration website:  https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program#section-header-0

You should remain in contact with your banker and accountant for updates.  In addition, the SBA website FAQs document will be regularly updated.

What Is It?

The Paycheck Protection Program is set up as a loan program to be accessed by small businesses, in an effort to maintain employees on their payroll.  The program is offered through the U.S. Small Business Administration (SBA).  

How to Access

Actual funding is offered through existing SBA lenders, federally insured depository institutions, federally insured credit unions and Farm Credit Institutions that are participating.  There is a standardized form (which is updated from time to time, so make sure you have the current form), plus other required information.  We would recommend working with your accountant and banker to determine access and availability to this program.

Loan Details and Forgiveness

Loans mature in 2 years and interest is approximately 1%.  Loan Payments are expected to be deferred for 6 months and there is no need for collateral or personal guarantees.  There should not be any additional fees charged by the government or lenders associated with the loan.

There is potential for a portion of or all of the loan to be forgiven, but there are restrictions.  The forgiven amount will only be determined for funds used for payroll costs, interests on mortgages, rent and utilities.  Also, at least 75% of the forgiven amount must be used on payroll.  Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels.  Other restrictions may apply.

More information on the Paycheck Protection Program can be found on the SBA website.

For questions, please feel free to reach out to the Baron Team.

Disclosure: This is a general communication being provided for informational purposes only. It is educational in nature and not designed to be advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction.  Past performance is no guarantee of future results.  Every investment strategy has the potential for profit or loss. This material is not intended to be relied upon as a forecast, research, tax or investment advice.  Please consult your tax planning professional for personal tax advice.