How to apply for small business loan from stimulus package

## How to Apply for a Small Business Loan from the Stimulus Package

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed in March 2020, allocated $349 billion in funding for the Paycheck Protection Program (PPP) to provide small businesses with forgivable loans to help them navigate the economic challenges of the COVID-19 pandemic. Here’s a comprehensive guide to applying for a PPP loan:

### Eligibility Requirements

To qualify for a PPP loan, businesses must meet the following criteria:

– Business or non-profit organization with 500 or fewer employees (including full-time, part-time, and seasonal workers)
– In operation on February 15, 2020
– Have suffered economic hardship due to COVID-19
– Meet the relevant industry size standard (see SBA website for details)

### How to Apply

**1. Choose a Lender**

PPP loans are distributed through approved lenders, including banks, credit unions, and other financial institutions. Contact multiple lenders to compare interest rates, fees, and application processes.

**2. Gather Required Documents**

Prepare the following documents to support your application:

– Business formation documents (e.g., articles of incorporation, LLC operating agreement)
– Tax returns for the past two years (2018 and 2019)
– Payroll records for the past 12 months
– Bank statements for the past three months
– Proof of economic hardship, such as business closure orders or revenue decline

**3. Complete the Application**

The PPP loan application form can be accessed from the SBA website or through your chosen lender. The form requires information such as:

– Business and owner details
– Number of employees
– Average monthly payroll
– Requested loan amount

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**4. Submit Your Application**

Once you have completed the application, submit it to your chosen lender. The lender will review your application and make a decision on your loan approval.

### Loan Terms

**1. Loan Amount**

The maximum loan amount is calculated based on the business’s average monthly payroll costs for the previous year. The specific formula for calculating the loan amount varies depending on the business’s industry and size.

**2. Interest Rate**

The PPP loans have a fixed interest rate of 1% per annum.

**3. Loan Term**

The PPP loans have a maturity term of five years.

**4. Forgivable Portion**

The PPP loans are fully forgivable if certain criteria are met. The forgivable amount is based on the following expenses incurred within eight weeks of receiving the loan:

– Payroll costs (up to $100,000 per employee)
– Rent payments
– Utility payments
– Interest on existing debt

### Forgiveness Process

To apply for loan forgiveness, businesses must submit a forgiveness application to their lender. The lender will review the application and determine the amount of the loan that is forgivable. The remaining balance, if any, must be repaid.

### Additional Information

**1. Multiple Loans**

Businesses that have multiple locations or subsidiaries can apply for separate PPP loans for each entity, as long as they meet the eligibility requirements.

**2. Round Two Funding**

A second round of PPP funding was authorized by Congress in December 2020. The eligibility criteria are similar to the first round, with some modifications. Consult the SBA website or your lender for details.

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**3. Scams**

Beware of potential PPP loan scams. Only apply through approved lenders and be cautious of unsolicited offers.

### Conclusion

The PPP program provides a vital source of financial support for small businesses struggling with the economic impacts of COVID-19. By following the steps outlined in this guide, businesses can apply for and potentially secure PPP loans to help them navigate these challenging times.

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