Paycheck Protection Program
Paycheck Protection Program (PPP) funding has been exhausted for most industries. If you have questions regarding the PPP, please contact your MVB Relationship Manager.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was recently passed to provide emergency relief for small-to-medium sized businesses impacted by COVID-19. The Act created the Paycheck Protection Program, which will serve as an extension of the Small Business Administration (SBA) 7(a) loan program, allowing financial institutions to provide federally-backed, forgivable loans to eligible businesses.
- The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their employees on their payroll.
- SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, benefits, rent, mortgage interest, or utilities expenses.
- Impacted businesses may only receive one Paycheck Protection Program loan.
- Available to entities impacted by COVID-19 between February 15, 2020 and June 30, 2020, although program funding limitations may impact loan availability for those businesses applying later in the program.
- Small businesses with 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors affected by COVID-19 (coronavirus).
- Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
- Small businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. This means each store location could be eligible.
Details & Forgiveness:
- Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels.
- Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
- Due to likely high program subscription, at least 75% of the forgiven amount must have been used for payroll.
- Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
- Starting April 3, 2020, small businesses and sole proprietorships can apply for loans to cover their payroll and other certain expenses.
- Starting April 10, 2020, independent contractors and self-employed individuals can apply for loans to cover their payroll and other certain expenses.
Frequently Asked Questions
Do I need to first look for other funds before applying to this program?
No, the SBA is waiving the usual requirement that you try to obtain some or all of the loan funds from other sources (i.e., we are waiving the Credit Elsewhere requirement).
How long will this program last?
Although the program is open until June 30, 2020, we encourage you to apply as quickly as you can because there is a funding cap and lenders need time to process your loan.
How many loans can I take out under this program?
What can I use these loans for?
Payroll costs, including benefits;
- Interest on mortgage obligations, incurred before February 15, 2020;
- Rent, under lease agreements in force before February 15, 2020; and
- Utilities, for which service began before February 15, 2020.
What counts as payroll costs?
Payroll costs include:
- Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
- Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
- State and local taxes assessed on compensation; and
- For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.
How large can my loan be?
Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap. If you are a seasonal or new business, you will use different applicable time periods for your calculation. Payroll costs will be capped at $100,000 annualized for each employee.
How much of my loan will be forgiven?
You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
You will also owe money if you do not maintain your staff and payroll.
- Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
- Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
- Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
How can I request loan forgiveness?
You can submit a request to your assigned lender. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. A decision on the forgiveness will be made within 60 days.
When do I need to start paying interest on my loan?
All payments are deferred for 6 months; however, interest will continue to accrue over this period.
When is my loan due?
In 2 years, but you can repay the loan sooner and there are no prepayment penalties or fees.
Do I need to pledge any collateral for these loans?
No. No collateral is required.
Do I need to personally guarantee this loan?
No. There is no personal guarantee requirement. However, if the proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against you.