What are PPP Loans?

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During this time of economic struggle, the number of loan applications and extensions have multiplied dramatically. Many individuals and businesses are required to take out loans in order to make it through this crisis. One loan, in particular, that is mentioned frequently is known as the ‘PPP loan’, or the Paycheck Protection Program loan.

What is a PPP Loan?

The PPP loan’s purpose is to allow small businesses to keep their workers employed. The program has a streamlined application process in order to quickly get the money to where it can help businesses. The loan that is received can be for up to 2.5 times the company’s monthly payroll costs. This is up to a maximum of $10 million. This loan has an interest rate of 1%, and a maturity date of two years. Payments on the amounts that have not been forgiven can be deferred for the first six months after the two years have passed.

The payroll costs that the loan can be used for include: salary, vacation pay, parental pay, medical pay, and group health care coverage, among others.

Who Qualifies for a PPP Loan?

Any small business can qualify for the PPP loan so long as they have 500 employees or fess. This could also include individuals who are self-employed, and independent contractors.

Farms, gambling establishments, and lobbyists are not eligible to apply for the PPP loan. As well, hedge funds, private equity firms, and many public companies are not eligible to apply for the loan either.

Loan Forgiveness

If the funds are used to pay for payroll, mortgage interest, rent, and utilities as they are meant to be used, the loan can be fully forgiven. For this to happen, payroll charges need to have made up at least 75% of the loan amount. In addition to this, employees need to be retained at the company for at least eight weeks in order to qualify for full forgiveness. If workers have already been let go between February 15 and April 26, the company would have until June 30 to re-fill the positions.

The loan is meant to help small businesses keep their workers long enough to get back on their feet. This serves to benefit both the business and the employees. This is why the loan is forgiven if certain requirements relating to payroll are met. If any workers are laid off, or salaries are decreased, the loan will not be fully forgiven.

Changes to the PPP loan

Recently, a bill has been proposed that may change the expenses that can be covered under the PPP loan. This bill would allow businesses to spend their loans on personal protective equipment for their workers, such as masks and gloves. As well, it would also allow for the purchase of equipment needed to follow new safety standards. This would include plexiglass barriers, hand sanitizer, and other cleaning products.

The proposed bill would also have an extended timeline in which they could use the funds, and it would push the deadline for applying to December 31. Currently, the deadline for applying is June 30.



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