Orlando, Fla.— At a time when small businesses are suffering significant loss of business, caused by the COVID-19 interruption to the national economy, business owners seek options to keep their operations afloat, keep their companies/businesses properly staffed to prevent further reductions of their client base. The Small Business Adminstration’s (SBA) solution for those businesses with thinner streams of revenue, unable to sustain themselves in a slowed down market environment is the Paycheck Protection Program, also known as the PPP. Independent contractors and self-employed individuals that have been adversely impacted by the COVID-19 pandemic have been eligible to apply for these loans since April 10, 2020. Under the CARES Act, you are not required to look for funding in other places before applying for a PPP Loan. There are no prepayment penalties or fees, and no collateral is required. Although the program is open until June 30, 2020, the government is encouraging borrowers to apply as quickly as possible because there is a funding cap and lenders need time to process your loan.
The requirements are straightforward. You must have been in operation on February 15, 2020, your business must have been harmed by the COVID-19 pandemic. Along with your loan application, you must submit the required documentation, such as:
Income and expense reports for 2019
ID Verification: color copy of a government-issued ID (front and back) for all owners listed on the application.
Loan Details and Loan Forgiveness
- The maximum loan size is up to 2.5 times your average monthly 1099-MISC or net self-employment income for the past 12 months.
- All amounts spent on the following items during the first 8 weeks of the loan term are 100% forgivable: (a) to replace your 1099-MISC income or your net self-employment income, (b) interest on business mortgages, (c) business rent, and (d) business utilities. Due to high demand, if more than 25% of this amount is used for (b), (c) and (d), some of those expenses may not be forgivable.
- You will have to apply for loan forgiveness separately after you have received your loan.
- The interest rate is fixed at 1% and the loan term is 2 years.
- 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 for the loans.
These funds can be of help in a series of circumstances like:
- The replacement for your normal 1099-MISC or net self-employment income (capped at $100,000 on an annualized basis)
- Interest on mortgage obligations, incurred before February 15, 2020
- Rent, under lease agreements in force before February 15, 2020
- Utilities, for which service began before February 15, 2020.
In the event that you would need to request forgiveness, your request will need to 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. Your lender must make a decision on the forgiveness within 60 days.
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Mariana Zorrilla, CIC, CRIS, CPIA