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What to know about the SBA Paycheck Protection Program

Written by: Patrick Findaro
Last Updated by Catalina Lima: August 25, 2022
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Hello, this is Patrick Findaro, co-owner of Visa Franchise and Vetted Biz. Just wanted to give a little update on the CARES Act in addition to the twelve hundred dollars that most Americans are going to be receiving. There are also three hundred forty-nine billion dollars allocated to the SBA in the form of the Paycheck Protection Program. We’ve been getting a lot of inquiries on who is eligible. Just wanted to go through the program real quickly.

Who Is Eligible For The SBA Paycheck Protection Program?

Small businesses, with up to 500 employees are eligible for this. That does include franchises, also includes businesses that have 20 percent or more ownership from a foreign national. There was some ambiguity if they would be included in the first application. It clearly said no, that it needed to be a U.S.citizen or permanent resident. Now that the application has been approved, that’s fine. If you’re on some non-temporary visa like the E-2 or L-1 visa, you can still get approved for this program. Or if you have a minority or majority owner, it will still be included. We’re going through the steps ourselves at Visa Franchise. We’ve gone through the application process with Chase. We’re in the middle of the process, rather.

How To Apply For The SBA PPP?

So really important how to apply. You got to reach out to your banker. Hopefully, you already have a relationship checking relationship, credit card and possibly other lines of credit with a bank. Call your banker today. Understand how you can get the application and as soon as you can. If the bank right now isn’t accepting, you have to apply through the SBA loan program. Some of the large banks require that you had a pre-existing lending relationship, so not just a  business checking account. Then you should Google, reach out to your community banks, Google around where you live.

Understand who the small banks are and reach out today because there are some smaller banks that have already done SBA lending or are getting positioned to do SBA lending and they will take in new clients that you didn’t already have a  relationship with that bank. And this could be a good opportunity for them also to extend their capabilities for some new small business owners.

small business administration

Terms And Interest Rates

The term and interest rates. So the term, it’s a two-year loan where for the first few months there’s no payment of principal nor interest payments that are required. And there are no prepayment penalties throughout the entire two years. The interest payment is 1 percent and there is a forgivable portion of the loan.

That forgivable portion of the loan should be two and a half times the payroll and associated employee costs.

Are Franchises Eligible For SBA PPP?

One of the questions is do franchises are franchises eligible for the SBA triple P loan program? Yes, franchises are eligible. There was some uncertainty as to the affiliated requirements with the affiliation requirements on private equity-funded businesses and venture capital-funded businesses are not eligible for the SBA Triple P loan program.

Know many of them on this article.

Maximum SBA Paycheck Protectio Program Loan Amount

So the question we’ve gotten a few times now is what is the maximum loan amount? And it’s the lesser of 10 million dollars or 2.5 times the average payroll costs. How you calculate the maximum loan amount is a bit unclear. We’re going through the process ourselves, going on the SBA loan website. They give guidance. It’s the last 12 months, while exactly the last twelve months from March 31? From when we submit the loan application? It’s also unclear where banks are saying it’s the 2019 average monthly payroll costs.

There’s been a lot of questions about what is the payroll costs. Does that include salaries, wages? Yes, it does. It also includes health care benefits, commissions and a few other employee benefits. There’s been some questions between the SBA, the lenders like Chase on what exactly is included in that and hopefully, in the coming days, that will be cleared up.

small business administration

There Is Stil Competition

The government has allocated three hundred forty-nine billion dollars to the program. But given that there are over a million small businesses that are eligible for this program, and many of them will be requesting $50,000, $70,000, $100,000+ from the program. And you can do a simple calculation that there isn’t enough to meet the requirements of these businesses.

There are also some large businesses like Shake Shack, for example, that there is an exemption for large businesses in the restaurant space that have multiple locations where they can still benefit from this program. So not only are you competing for priority with other small business owners, but you also are competing with some very large restaurant groups that have multiple locations with thousands of employees on the payroll. However, scattered across different locations.

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