The $2.2 trillion federal stimulus package approved by Congress and signed into law by the president last week, also known as the "CARES Act," includes $350 billion for small-business loans through the Paycheck Protection Program.
This money is intended to help small businesses keep their employees and will be administered primarily through existing Small Business Administration (SBA)-approved lenders.
The application period is expected to open this week, (federal officials are reportedly aiming for Friday), but businesses should start getting their paperwork in order ASAP to facilitate the process.
That means collecting tax returns and payroll reports and keeping careful records of employees who have taken sick time because they tested positive for COVID-19 or had to take take off to care for someone who did.
Lenders are going to be inundated with a massive volume of applications. The SBA has already been overwhelmed by the number of applications for disaster loans, which has caused its website to intermittently crash or be unavailable.
The more prepared you can be before trying to formally apply, the better, experts say.
The paycheck program is in addition to SBA economic disaster loans and two programs passed earlier this month to help businesses with expenses related to paid sick leave and family leave.
The amount any small business is eligible to borrow is 250 percent of their average monthly payroll expenses, up to a total of $10 million. Sole proprietors, independent contractors, gig economy workers, and self-employed individuals are all eligible.
The covered period during which expenses can be forgiven extends from February 15, 2020 to June 30, 2020. Borrowers can choose which 8 weeks they want to count towards the covered period, which can start as early as February 15, 2020.
The loan is forgiven at the end of the 8-week period after you take out the loan. Borrowers will work with lenders to verify covered expenses and the proper amount of forgiveness.
The amount of principal that may be forgiven is equal to the sum of expenses for payroll, and existing interest payments on mortgages, rent payments, leases, and utility service agreements.
More information about eligibility can be found here.