Paycheck Protection Program

Aug 21, 2020

This year thousands of small business owners quickly discovered one of the many benefits of having a banking relationship with a local community bank when they tried to obtain a PPP loan.  It was nearly impossible for smaller small businesses to get PPP loans from their megabanks and it took the big banks weeks to provide meaningful application information, which often meant the small business owners didn’t receive any funds in the first round of PPP loans, causing some to lose their businesses.  But at Barwick Banking Company, we were able to help 14 companies save over 40 jobs with over $800,000 in PPP loans.

On Friday, March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided nearly $2.2 trillion in economic stimulus. The main stimulus for small businesses in the CARES Act was the Paycheck Protection Program (PPP) and allocated $350 billion for PPP loans, with subsequent legislation providing an additional $319 billion.  Although the deadline to apply for a PPP loan was August 8, 2020 and they are no longer available, they were funded and administered through the U.S. Small Business Administration (SBA) and their loans allowed small businesses adversely impacted by the COVID-19 pandemic to obtain financing needed to continue their business operation.

PPP loans provided a direct incentive to small businesses with less than 500 employees to keep their workers by guaranteeing eight weeks of payroll, allowing their workers to pay their bills.  It also aided businesses to remain solvent and maintain their operations by allowing 40% of the loan to be used for other business expenses like group healthcare and insurance premiums, utilities, and rent.  4.8 million small businesses received PPP funding and the program saved millions of jobs over the past few months.

All PPP loan terms are the same for everyone, regardless of which lender they used to obtain their loan.  PPP loans are eligible to be forgiven provided certain requirements are met. (See here for more information on loan forgiveness.)  The SBA recently started allowing PPP loan recipients to apply to have that debt forgiven.  However, some online financial advisors, suggest waiting until the legislative dust settles before applying for PPP loan forgiveness as the rules have continued to evolve ever since the program was first rolled out.