The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress in late-March allocating over $2 trillion in funds to help both businesses and individuals cope with the economic effects of the COVID-19 pandemic. One of the key outcomes from that bill specifically for small businesses is called the Paycheck Protection Program, or PPP, which is a low-interest loan program to help companies meet payroll. Applications for the program open on Friday, April 3, and should be submitted to an approved lender. Though there may be initial delays as lenders and the federal government establish a cadence, we still encourage applying.
Below are frequently asked questions and answers provided by Baker Tilly, as well as a deck with even more information for those that would like a deeper dive. We are grateful to Baker Tilly for their expertise!
One common question that has not yet been fully answered is whether venture-backed startups are eligible for the PPP. We expect further clarification in the coming days, but a report by Axios indicated that startups with VC backing will be eligible for the program, while those controlled by private equity firms will not. At this time, we encourage startups to apply, but caution that there is some fluidity around how the bill may affect them.
Depending on your business’s situation, the loan size will be calculated in different ways. The maximum loan size is always $10 million.
Borrowers may apply for PPP loans and other SBA financial assistance, including Economic Injury Disaster Loans (EIDLs), 7(a) loans, 504 loans, and microloans, and also receive investment capital from Small Business Investment Corporations (SBICs). However, you cannot use your PPP loan for the same purpose as your other SBA loan(s).
For example, if you use your PPP to cover payroll for the 8-week covered period, you cannot use a different SBA loan product for payroll for those same costs in that period, although you could use it for payroll not during that period or for different workers.
For any amounts not forgiven, the maximum term is 10 years, the maximum interest rate is 4 percent, zero loan fees, zero prepayment fee (SBA will establish application fees caps for lenders that charge).
Forgiveness on a covered loan is equal to the sum of the following payroll costs incurred during the covered 8-week period compared to the previous year or time period, proportionate to maintaining employees and wages (excluding compensation over $100,000).
Baker Tilly Virchow Krause, LLP (Baker Tilly) is a leading advisory, tax and assurance firm whose specialized professionals guide clients through an ever-changing business world, helping them win now and anticipate tomorrow. Headquartered in Chicago, Baker Tilly, and its affiliated entities, have operations in North America, South America, Europe, Asia and Australia. Baker Tilly is an independent member of Baker Tilly International, a worldwide network of independent accounting and business advisory firms in 145 territories, with 34,000 professionals. The combined worldwide revenue of independent member firms is $3.6 billion.
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