All You Need to Know About PPP Loans
Currently, several small children based in the United States have been affected by the coronavirus pandemic. However, the government has created the Payment Protection Program (PPP) to help you with the cancellation of the payroll of your employees, credits, and suppliers. But what is the PPP loan? When will the next round be and how do they work? These are some of the questions asked by Spanish speakers who have a business in this American country.
In our review, you can read everything related to its operation, the deadline to grant them, and more. We invite you to continue reading.
What are PPP Loans?
It refers to an aid granted by the Federal Small Business Agency for those small and medium-sized companies that have been affected by the Coronavirus pandemic. It is worth mentioning that this benefit was granted as of 2020 to contribute to the payment of workers, rent payments, suppliers, and more.
All this is because the commercial sector has been greatly affected by the health crisis that has been experienced throughout the world and especially in the USA.
PPP Loan Feature
This credit is granted by the State so that the enterprises can pay their payroll, pay taxes, services, rent, and other expenses.
But, if you want to pay all the interest on your mortgage and have the debt paid off, you can only use 25% of the amount granted by the PPP. Because 75% will be implemented to pay off your debt.
On the other hand, the government will forgive you the payment of this program if you use all the money granted to cancel the payroll of your company’s employees. In addition, you keep the amount of salary they earned before the pandemic. In other words, the PPP loan will be transformed into a subsidy.
What is PPP Loans For?
The US government has been aware of all the economic conflicts that have led to confinement due to the health crisis. For this reason, we put this program into practice to support small and medium enterprises.
Thus, avoid its closure and the massive dismissal of employees. Therefore, this credit is used to pay for the services provided by the workers, basic services, and some suppliers. In addition, they serve so that the employer can cover the medical expenses of employees who have been affected by the coronavirus.
Who Can Apply for This Loan?
PPP loans are assigned to entrepreneurs and businesses that carry out a specific activity. Which must meet the following requirements:
Independent workers
- Having a sole proprietorship, in other words, having its sole owner, who is the person in charge of financing and managing the business. In addition, it belongs to the medical assistance, accounting, cleaning, and gardening sectors.
- Independent professionals, such as lawyers, doctors, dentists, and others.
- Workers who develop projects. Examples; are writers, digital content writers, graphic designers, architects, web designers, and sound engineers, among others.
- People who work as carriers or food vendors.
Private businesses
- Small businesses that comply with all State and SBA regulations.
- Businesses with less than five hundred workers that are non-profit or dedicated to hotel services.
- Companies with more than five hundred employees comply with the SBA statutes.
How to Apply For the PPP Loan?
If your enterprise or business has been chosen to benefit from this program, it is necessary that in the deck round of the current year you visit the financial institution and deliver the collections:
- Tax payment certificate for the tax year.
- A record that during the pandemic he was working.
- Bank account certificate.
- Fill out the application forms.
- Payroll payment slips.
- Certificate of formation of the company.
What Is the Amount Of This Credit?
In reality, the amount of the PPP loan that is granted to companies depends on the net monthly payroll expense. Because this value must be multiplied by 2.5 so that the employer can cancel some benefits that it grants to its workers. For example, if your monthly payroll payment is USD 50,000 per month, you will receive a loan of USD 125,000. It is worth mentioning that the maximum amount to request is USD 10,000,000.
Thus, it will have the necessary liquidity to cover this expense and not lay off or reduce the salary of the workers. Likewise, you may have an extra for various expenses or the payment of a mortgage. In this way, the government tries to maintain stability in the commercial and economic sectors, so that it does not suffer a decline.
How to Opt for PPP Loan Forgiveness?
If you want the State to forgive you the payment of this credit, everything depends on the use of this amount. The steps to follow are the following:
Step 1: pay employees
Once the loan amount is deposited into your legal account, you must wait 8 weeks to pay your workers. That is, allocate 75% of this amount for that debt, while the other 25% to pay rent, electricity, internet, water, mortgages, and other expenses.
Step 2: Don’t fire workers
The other step to enjoying this forgiveness is during this time not to fire any of your employees. That is to say, the payroll remains intact, and also the salary is granted. Well, the State has the purpose of guaranteeing employability to all citizens who hold a job in a government or public company.
Step 3: Request credit forgiveness
Once 6 months have elapsed since the delivery of your loan, you must go to the financial institution that granted you the money to introduce all the relevant papers. Well, in the link between the State and your company. After 15 business days, they will contact you to notify you of the decision on your request.
How Long Do PPP Loans Take to Pay Off?
Once you are a beneficiary of this program you will have 24 months to pay it with an annual interest rate of 1%. In addition, you have 6 months deferred, which means that after receiving the loan you will have 186 days to start paying it.
Finally, you know everything about PPP loans. That is its functions, requirements, ath pplication process, and more. In this way, you can enjoy this benefit granted by the State to support small and medium-sized businesses in the United States.
Read More: 6 Best Personal Loans in the USA
