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The best time to get a business line of credit is when you don't need it—but that's not always possible. Here are some ideas for how to pursue credit now.
Businesses that can understand shifts in consumer behavior and quickly respond—or even anticipate them—may find it easier to reimagine a long-term business strategy that endures.
An overview of all the different economic relief programs which businesses are eligible, deadlines, dollar limits and other stipulations, and more.
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The forgiveness period depends on when you applied for your loan. If you took a PPP loan before June 5, 2020, you can choose eight or 24 weeks (ending no later than December 31, 2020). Any loan received June 5 or later must use a 24-week forgiveness period (ending no later than December 31, 2020). How the forgiveness period works:
- The eight- or 24-week period for making forgivable PPP loan expenditures is generally measured from the date the loan proceeds are disbursed.
- However, if you use a biweekly (or more frequent) payroll schedule, you instead may elect to calculate eligible payroll costs using the period that begins on the first day of your first pay period following the day your loan is dispersed.
- Covered expenses are those that were paid or incurred during the forgiveness period.
- Payroll costs are considered paid on the day paychecks are distributed. Payroll costs are considered incurred on the day the employee’s pay is earned.
- If a cost is incurred but not paid during the final pay period within the forgiveness window, you can still count it in the forgiveness if you will pay it before the next regular payroll date.
Forgivable expenses include payroll, rent or lease payments, mortgage interest, and utilities (whether they’re paid or incurred within the forgiveness window, as long as ultimately they’re paid before the next regular billing date). Interest on the PPP loan begins accruing on the loan origination date, but it’s also forgivable.
At least 60% of the amount forgiven must be used for payroll expenses, but the amount can be higher, up to 100%. Additional guidance may provide further clarity. See A-22 (PDF) for how to calculate the 60%.
The amount of forgiveness may be subject to reduction if the employee head count or certain salary levels are reduced. See A-19 and A-20 (PDF) for details. Also subtract any Economic Injury Disaster Loan grant previously received by the business.
See the Paycheck Protection Program overview (PDF) for additional details.
EIDLs are designed to cover other disaster-related expenses, such as increased production costs due to supply- chain interruptions. They’re generally available to companies with 500 or fewer employees that can demonstrate a substantial economic injury due to a declared disaster. For-profit companies are eligible, as are nonprofits, ESOPs, sole proprietors, independent contractors, and self-employed individuals.
Much of the Coronavirus Aid, Relief, and Economic Security (CARES) Act is aimed at businesses with fewer than 500 employees per business location, although there may be exceptions according to the SBA definition of “small business” for a certain industry.
Special provisions are included for large businesses in troubled industries, such as airlines.
Sole proprietors, gig workers, and independent contractors also are eligible, as well as nonprofits and veterans’ organizations.
Ineligible: private equity or venture capital firms, or businesses connected to Congress or the White House.
This act (signed into law June 5, 2020) loosened some of the original restrictions placed on loans secured through the PPP. It gives businesses more time and flexibility to spend their loans. Key features:
- Increases spending window to 24 weeks (from the original eight-week window).
- Lowers what must be spent on payroll to earn full loan forgiveness to 60%.
- Extends deadline to restore staff and salaries to end of 2020.
- Allows all businesses to delay 2020 payroll tax payments.
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