With so many small businesses facing challenges in these uncertain times, many truck drivers and freight forwarders are concerned with how they can gain financial relief. Small business owners are especially vulnerable due to the stay-at-home orders being placed nationwide in the midst of the coronavirus shutdowns. To help offset the financial impact on small businesses, the government has introduced help in the form of the Payroll Protection Plan (PPP). Still, with the introduction of the Payroll Protection Plan just last week, many still have questions regarding how to apply for this form of government assistance.
Today, Bookkeeping It Simple will be answering all of your questions regarding the Payroll Protection Plan, the Economic Disaster Loan, and what are the differences. With this information, it is our hope that you, as a truck driver or freight forwarder, will have a better understanding of the options at your disposal regarding financial help. With that, let’s get started.
What is the Payroll Protection Plan (PPP)?
The Payroll Protection Plan authorizes up to $349 billion in forgivable loans to small business owners in order to pay their employees despite the impact of COVID-19. Loan payments will be deferred for 6 months.
Loan amounts are completely forgiven given if applicants meet certain standards that include: employee and compensation levels are maintained and the loans are used to cover most mortgage interest, utility costs, rent, and payroll costs during the 8-week period after the loan is awarded.
Any business with 500 employees or fewer (including veteran organizations, nonprofits, sole proprietorships, independent contractors, self-employed individuals, and tribal business) can apply. Further, businesses that meet applicable SBA employee-based size standards for certain industries can have more than 500 employees. More information can be found at: https://www.sba.gov/federal-contracting/contracting-guide/size-standards
Both small businesses and sole proprietorships can apply starting April 3rd, 2020 while self-employed individuals and independent contractors can apply starting April 10th, 2020. Once other regulated lenders are both approved and enrolled in the program, they will be able to start making loans Currently, the interest rate is at a fixed rate of less than 1 percent.
Businesses have to apply for the PPP loan through any existing SBA lender. Businesses can also apply through any federally insured credit union, federally insured depository institution, and Farm Credit System institution that is participating. You can view a list of accredited SBA lenders by visiting: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp
You can find more information regarding applying for the PPP loan by visiting the following link from the treasury: https://www.sba.gov/document/sba-form–paycheck-protection-program-borrower-application-form
What is the Economic Injury Disaster Loan (EIDL)?
The Economic Injury Disaster Loan has been around prior to COVID-19. It is a form of government assistance that can provide up to $2 million dollars in financial assistance to either small businesses or private non-profit organizations if they suffer from substantial economic loss based upon the declaration of a disaster. The government has declared the COVID-19 pandemic a disaster.
The Economic Injury disaster’s advance is forgivable, but the additional funding is not. It is a 30-year fixed loan, the loan is deferred for the first 12 months. The full loan is used for working capital, other than the advance, it is not required to be used towards payroll.
Additionally, the total sum of the advance has been modified. The law states that applicants can request up to $10,000 however, due to high demand, the SBA is scaling the advance and will provide up to $1,000 per employee for up to 10 employees total.
This loan is offered directly through the SBA via the following link: https://www.sba.gov/page/disaster-loan-applications
What is the Difference Between the EIDL and PPP?
As you can see from the following graph, if you were to get a loan to cover the cost related to the COVID-19, the PPP has advantages over the EIDL. Unless you need funding in addition to payroll, rent, and utilities then the also apply for the EIDL.
Note, what is not mentioned in the graph, however, is the fact that the EIDL advance is forgivable and will need to be included in your PPP loan