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April 7 webinar recap — PPP loan forgiveness question and answers
On Monday the Washington Hospitality Association hosted a webinar featuring experts from the National Restaurant Association and the Small Business Administration (SBA) to field questions concerning federal relief and small business loans to help business impacted by the coronavirus outbreak.
Among the key points discussed were the two programs the SBA is providing to small businesses: the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP), a companion piece to the EIDL.
Economic Injury Disaster Loan: These loans are direct loans of up to $2 million with a fixed 3.75% interest rate that are termed out over 15-to-30 years. At the end of the application process you’ll be asked if you want a quick cash advance, up to $10,000, dictated by employee level, roughly $1,000 per employee. This advance does not need to be repaid whether you are approved or not.
Paycheck Protection Program: Described as a companion piece to the EIDL, this program is tailored more specifically to employee payroll and retention. The big feature of these loans are their forgivability – should 75% of the loan go towards payroll, the entirety of the loan can be forgiven. These loans max out at $10 million and anybody who is defined as a small business or is a nonprofit organization (501 (c) 3) is likely to qualify for the program.
What can be forgiven as part of the Paycheck Protection Program? The whole loan is eligible for full forgiveness should 75% of the total loan be put towards payroll, calculated based on total payroll.
What if I spend less than 75% on payroll? You can still get loan forgiveness, but not total loan forgiveness – the forgiveness rate will be reduced proportionally should less than 75% of the loan go towards payroll expenses. This can be backdated.
What if I don’t have enough work to justify paying an employee? Due to the unusual circumstances of this outbreak, it is advised that owners move away from mindsets or concerns about not paying somebody for not working. This is an urgent and unusual situation and maintaining payroll and keeping employees is intended to facilitate an “effective restart” of all business currently suffering.
Does a recent change in ownership impact loan eligibility? Even if you’ve just recently signed a lease or haven’t got a lot of people on payroll, you may still be eligible for relief and benefits from these programs.
At the end of the day, there is still a lot of ambiguity about how loan forgiveness will roll out. These details will continue to be clarified as time goes by.