On June 30, 2020, the Senate unanimously passed an unexpected extension of the application deadline for the Paycheck Protection Program (PPP) loan. When the legislation is passed by the House of Representatives and signed by President Donald Trump, the money will keep flowing to millions of small businesses until August 8, 2020!
If you are considering applying for a PPP loan, debating whether and how to spend your loan, or considering other options for business relief, we recommend working with a trusted financial advisor. However, at George Law, we have business lawyers available to assist you with any questions or concerns you may have regarding important business decisions amidst the COVID-19 pandemic.
What is the PPP?
The PPP is a huge loan program that has successfully kept almost 5 million small businesses running during the coronavirus pandemic. This program is part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) administered by the Small Business Administration (SBA).
As of today, the PPP has dispersed over $500 billion to these businesses. Right now, there is still well over $130 billion remaining that has not yet been allocated.
Who qualifies for a PPP loan?
To qualify for a PPP loan, any small business that has 500 employees or less may be eligible. This includes, but is certainly not limited to:
- Small businesses
- Restaurants and hospitality businesses
- Limited Liability Companies (LLC)
- C corporations and S corporations
- Private nonprofits
- Veteran organizations, faith-based organizations, and tribal organizations
- Independent contractors
- Sole proprietors
Who is ineligible for the PPP?
Businesses that cannot get a PPP include:
- Hedge funds and private equity firms
- Most publicly-traded companies that have substantial market values
- Companies that are involved in bankruptcy proceedings
- Business owners who are over 60-days delinquent on their child-support obligations
- Businesses engaged in illegal activities
- Sex businesses
- Gambling establishments
- Ranches and farms
Should I apply for a PPP loan?
At first glance, business owners may assume that the best decision is obvious: to apply for a PPP loan. If you qualify for loan forgiveness, isn’t it just free money? However, there are other details that small-business owners should keep in mind.
In particular, borrowers should consider how long they have to spend the money and what percentage of the loan they are allowed to spend on non-payroll expenses (i.e. utilities, rent, etc.).
Additionally, there are other government programs available to assist small businesses. For instance, the SBA has additional loan programs designed for small businesses, such the Economic Injury Disaster Loans (EIDLs). Also, business owners should consider private initiatives, such as Facebook grants.
For small business owners during this time, these decisions may be overwhelming. But you don’t have to be confused by all these rules and options. The experienced attorneys at George Law can help explain and simplify the process for you – we make it easier! Our experienced business attorneys are well-versed in what is required for the PPP, how much can be borrowed, how debt forgiveness operates, and other key aspects. Reach out to George Law today at (248) 470-4300.