JACKSONVILLE, Fla. – As small business owners scramble to keep their doors open, there’s at least one option on the table that could help keep them afloat.
The federal government has what’s called the Paycheck Protection Program, which authorizes up to $349 billion in forgivable loans. So far, 860,000 applications for a total of $210 billion have been approved through this program.
What separates these loans from traditional bank loans is the term forgivable. In other words, small business owners who follow the program’s rules will not be required to pay all of it back down the road.
LEARN MORE: Visit the Small Business Administration’s website
All businesses — including nonprofit groups, veterans organizations, tribal businesses, sole proprietorships, self-employed individuals and individual contractors — with 500 or fewer employees are eligible to enroll in the PPP.
These loans can be used to cover payroll costs including employee benefits, interest on mortgage obligations, and the cost of rent and utilities incurred before Feb. 15.
At this point, it’s fair to wonder how much of each loan will be forgiven. Here’s what you need to know:
- You will owe money when your loan is due if you use the loan for anything other than what’s listed above;
- You will also owe money if you do not maintain your staff and payroll;
- Size of staff: Your loan forgiveness will be reduced if you decrease your full-time workforce;
- Level of payroll: Your loan forgiveness will be reduced if you decrease salaries and wages by more than 25 percent for any employee that made less than $100,000 annualized in 2019;
- Re-hiring: You have until June 30 to restore your full-time employment and salary levels for any changes made between Feb. 15 and April 26.
Alyssa Fagien, the founder of Atlys Media, started her social media company three years ago. With a staff of just three and an intern, she said it really is more than just a business.
“We are together every day," Fagien said. "I spend more time with these girls than anyone in my life.”
The majority of her clients are other small businesses. Fagien has savings, but she said with as small and as new of a business like her business, she can only make it work for so long.
She said she has not yet applied for the PPP program.
“Interestingly enough I have not actually applied. I’m on a waiting list to apply,” she said.
Faigen filed the paperwork a week ago at Wells Fargo. When she went to other banks, they told her she couldn’t fill out an application because she doesn’t have an account with them.
She said she feels like she’s getting the short end of the stick as a really small business, dealing with a bigger bank.
Financial Advisor Joe Krier agrees that businesses are likely to have more success at a local credit union.
“I think the smaller banks are probably not as overwhelmed with the volume the large banks are, and the large banks are looking at potential losses they’re going to have on the other side,” said Joe Krier, a financial adviser.
Financial experts recommend if businesses are going to apply for the loan, to do it this week.