There is $349 billion of emergency small business capital in the government’s coronavirus relief package that qualified businesses can (in the very most ideal scenario) start getting access to tomorrow.

The Payroll Protection Program, the centerpiece of the three small business lending programs outlined in the CARES Act, is designed to help businesses keep their employees at a time when income is mostly on pause but expenses are not. It’s effectively an offer of free money — if used correctly — and virtually every U.S. small business will qualify for it. 

More than a quarter of small businesses (26.1 percent) have closed since the beginning of March, posting no new sales since the beginning of the coronavirus shutdown, according to data from CardFlight. Millions more are likely to fail in the next few weeks if they can’t get help ASAP.

So here's what small businesses need to know about the Payroll Protection Program.

What you apply for is a loan, but it will be fully forgiven — meaning you don’t have to pay it back — if you use at least 75 percent of it on payroll expenses (up to $100,000 per employee) and within eight weeks of receiving the funds. For full loan forgiveness, the other 25 percent can also be used on mortgage interest payments, rent, or utilities.

If you took employees off of payroll since the beginning of March, no problem. You can hire them back and still have your loan forgiven. However, your loan forgiveness will be decreased if you cut your full-time headcount or decrease wages by more than 25 percent for anyone who makes under $100,000.

If you use less than 75 percent of your loan for payroll, only that percentage of the loan will be forgiven. So if you spend 60 percent of your loan to hire employees back, for example, only 60 percent of the loan will be forgiven.

If you end up having to pay some of it back, it still comes with good conditions: 0.5 percent interest with maturity of two years, the first payment is deferred for six months, no collateral, no personal guarantees, no borrower or lender fees payable to the Small Business Administration.

The maximum amount you can receive is $10 million. Your loan is calculated by multiplying your monthly average payroll cost in 2019 by 2.5.

There are two qualifications required for eligibility: you must have fewer than 500 employees, and you must have been in business before Feb. 15, 2020. This includes self-employed individuals and gig economy workers, as well as non-profits, veterans organizations, tribal concerns, sole proprietorships, and independent contractors.

You can apply through one of the 1,800 SBA-approved lending institutions from Friday, April 3, until June 30. 

Keep an accurate expense record during the loan period. Eight weeks after your loan signing date you’ll have to apply to your lender for loan forgiveness.

Call your bank as soon as you can — that’s the first step. The SBA is already slammed with small business loan applications and the door for the Paycheck Protection Program hasn’t even opened, but your bank has the best snapshot of your business’ financial life and should be able to help you better than other lenders. 

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