Beginning as early as this Friday, April 3, according to U.S. Treasury Secretary Steven Mnuchin, any and all FDIC lending institutions, credit unions and other approved lenders will be authorized to make 100% federally guaranteed Paycheck Protection Program (PPP) Loans to small businesses with 500 employees or less. These loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward.
 
For Lubbock businesses and 501(c)3 nonprofits, this means your traditional lender/financial institution should be authorized to make PPP loans beginning as early as Friday, April 3. The Lubbock Chamber of Commerce encourages you to contact your lender/financial institution as soon as possible to learn when they will begin taking applications for PPP Loans.
 
PPP Loans were created through recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act which set aside $350 billion to help small businesses and nonprofits keep workers employed amid the pandemic and economic downturn.
 
The U.S. Chamber of Commerce has issued this guide to help organizations understand what to expect and prepare to file for a loan.
 
Here are the questions you may be asking— and what you need to know.
 
1. Am I eligible?
You are eligible if you are:
  • A small business with fewer than 500 employees
  • A small business that otherwise meets the SBA’s size standard
  • A 501(c)(3) with fewer than 500 employees
  • An individual who operates as a sole proprietor
  • An individual who operates as an independent contractor
  • An individual who is self-employed who regularly carries on any trade or business
  • A Tribal business concern that meets the SBA size standard
  • A 501(c)(19) Veterans Organization that meets the SBA size standard
 
In addition, some special rules may make you eligible:
  • If you are in the accommodation and food services sector (NAICS 72), the 500-employee rule is applied on a per physical location basis
  • If you are operating as a franchise or receive financial assistance from an approved Small Business Investment Company, the normal affiliation rules do not apply
 
REMEMBER: The 500-employee threshold includes all employees: full-time, part-time, and any other status.
 
2. What will lenders be looking for?
In evaluating eligibility, lenders are directed to consider whether the borrower was in operation before February 15, 2020 and had employees for whom they paid salaries and payroll taxes or paid independent contractors. Lenders will also ask you for a good faith certification that:
 
  1. The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations
  2. The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments
  3. Borrower does not have an application pending for a loan duplicative of the purpose and amounts applied for here
  4. From Feb. 15, 2020 to Dec. 31, 2020, the borrower has not received a loan duplicative of the purpose and amounts applied for here (Note: There is an opportunity to fold emergency loans made between Jan. 31, 2020 and the date this loan program becomes available into a new loan)
 
If you are an independent contractor, sole proprietor, or self-employed individual, lenders will also be looking for certain documents (final requirements will be announced by the government) such as payroll tax filings, Forms 1099-MISC, and income and expenses from the sole proprietorship.
 
What lenders will NOT look for:
  • That the borrower sought and was unable to obtain credit elsewhere. 
  • A personal guarantee is not required for the loan.
  • No collateral is required for the loan.
 
3. How much can I borrow?
Loans can be up to 2.5 x the borrower’s average monthly payroll costs, not to exceed $10 million.
How do I calculate my average monthly payroll costs?