Forgivable Loans For Startups Facing COVID-19 Disruptions
Out of the hundreds of pages that comprise the massive U.S. stimulus bill, only a few sections are especially pertinent to startups weathering the pandemic. Of those, the most significant is the Paycheck Protection Program, a provision in the bill providing for forgivable loans to qualifying businesses that meet goals for maintaining headcount.
Just about a week after the bill’s passage, the U.S. Small Business Administration has begun accepting initial screening applications from companies looking to see if they might qualify for a piece of the nearly $350 billion allocated for loans. Beginning today, companies can also reach out to banks, including lenders who already process SBA loans as well as other institutions opting into the program.
The money is intended to provide eight weeks of cash-flow assistance to small business employers who maintain their payroll during the pandemic.
“The idea is to be able to start giving out those loans pretty quickly to small businesses,” said David Barron, an employment attorney with the law firm Cozen O’Connor. He expects startups will be flocking to apply over the next week.
Some requirements apply
The biggest draw, Barron said, is that it can be “free money.” If the employer maintains its payroll, then the portion of the loan used to cover payroll costs, interest on mortgage obligations, rent and utilities would be forgiven.
For startups looking to apply, it’s not a blank check. Lending is capped at the lesser of $10 million or 2.5 times the monthly annual payroll cost for the one-year period prior to the loan. Salaries are capped at $100,000 for an individual employee.