SIOUX CITY, Iowa (KCAU) – Small businesses may soon feel some relief thanks to a new loan forgiveness program. The Paycheck Protection Program, a component of the CARES act, will lend up to $349 billion in forgivable loans to small businesses.
The program was implemented on Friday and is being offered to any businesses with 500 employees or less and non-profits organized under 501(c)(3).
The amount businesses will receive can be calculated by one month of payroll times two and a half. For example, if a business has $10,000 in wage expenses over one month, they will receive $25,000 as a loan.
There are several guidelines required to follow in order for the loan to be completely forgivable by the Small Business Association.
Seventy-five percent of the loan is required to go toward payroll with the remaining 25% for expenses like rent and utilities. So, if a business has fewer employees and spends more toward rent and other expenses, the loan may not be forgivable.
Those receiving a loan are also required to average the same number of employees they had during the same time last year.
If a business has ten employees previously and they maintain all ten employees after receiving the loan, 100% of the loan is forgiven. If they have ten employees previously and now have eight, then 80% of the loan is forgiven.
The balance is then due in two years with a 1% interest rate.
Businesses can apply for the Paycheck Protection Program through any federally insured bank or credit union with an agreement through the Small Business Association.
