The federal government’s Paycheck Protection Program offering $350 billion in loans to small businesses has attracted widespread interest, but it’s also raised plenty of questions from both borrowers and lenders.
But banks have said they need more clarity on the rules for the program, and business owners told MarketWatch they’re confused by the loan conditions. It’s worth keeping in mind that sole proprietors, independent contractors and self-employed workers who may be part of the “gig economy” are also eligible, according to Julio Gonzalez, CEO of Engineered Tax Services.To apply for the loan money, applicants have to show they were in business before Feb. 15.
FMA also has a sample script that will help business owners know what questions to ask potential lenders. Questions include how the lender would like them to calculate payroll and staff head count.It’s important to bear in mind that the money coming out of the Paycheck Protection Program is separate and apart from the Economic Injury Disaster Loan program.
What are the terms? In order for the federal government to forgive a Paycheck Protection Program loan, recipients can only use it over the “covered period” of eight weeks for payroll and the non-payroll expenses of mortgage interest, rent and utilities, the Treasury Department said. The potentially forgiven amount decreases if the full-time employee head count decreases during the covered period, the Treasury Department said. The forgiven amount can also shrink if the loan recipient cuts salary and wages by more than 25% for any worker who made under $100,000 last year.
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