The federal government of the United States launched a forgivable business loan program called Paycheck Protection Program (PPP) after the outburst of COVID-19 pandemic. This program was established to mitigate the drastic impact of the COVID-19 pandemic on the country’s economy and to help business owners from losing their businesses. The Paycheck Protection Program (PPP) comes under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) passed by the government to combat the economic fallout resulting from COVID-19.
The Paycheck Protection Program (PPP) helped businesses, nonprofit organizations, and even self-employed workers. It allowed entities to apply for private loans with considerably low-interest rates for pay for certain costs like payrolls. The amount of loan offered to the applicant is nearly 2.5 times the average monthly payroll costs of the applicant. A PPP loan was offered so that businesses could pay their employees. The best thing about the Paycheck Protection Program (PPP) is that it may be forgivable. If the employee counts and employee wages are stable, a business may get its loan forgiven. A PPP loan may be partly or completely forgiven depending on the stability of the employee count and employee wages.
Paycheck Protection Program (PPP) was monitored by the U.S. Small Business Administration. Applications are already submitted and you can no longer apply for a PPP loan. The deadline for the submission of application was June 30, 2020 originally. However, it was extended to the 8th of August later. This economic relief package was a white knight for small businesses and other entities that had to suffer the drastic economic impacts of the unprecedented pandemic of COVID-19.
Paycheck Protection Program (PPP) Eligibility
Small businesses, self-employed persons, independent contractors, veteran organizations, nonprofit organizations, or tribal businesses could take this loan. Self-proprietors, independent contractors or self-employed persons were only entitled in case they had been in operation on February 15, 2020. The same goes for other applicants. However, their eligibility also depended on whether or not they had paid their employees or the outsourcers they had worked with.
A Paycheck Protection Program (PPP) Loan Amount
In essence, a Paycheck Protection Loan is provided to business owners to cover their payroll costs that typically include salaries, wages, and commissions. Therefore, the amount of loan given to an applicant depends on their payroll costs.
Depending upon the size and the type of business, payroll costs can include more than just salaries and wages. Gratuity, severance pay, housing allowance, commissions, and other compensations paid to employees are also included in payroll costs. These costs, however, are limited at an annual rate of $100,000 per employee.
This loan amount may also cover group health benefits and other insurance and retirement plans offered to employees. Taxes that are withheld from the emoluments of employees may be included in payroll costs. Nevertheless, the social security tax of the employer, Medicare tax of the employer, and federal unemployment taxes are not incorporated in payroll costs. All PPP loans that were offered had an amount less than 10 million dollars.