COVID-19: Federal Paycheck Protection Program (PPP)

Capitol Hill
U.S. Capitol Building Washington, DC

Small businesses and sole proprietorships affected by the coronavirus pandemic can apply for loans under the federal Paycheck Protection Program (PPP) beginning Friday, April 3. Independent contractors and self-employed individuals can apply starting April 10. The program is operated by the U.S. Small Business Administration (SBA) and is available through June 30, 2020.

Use and forgiveness
Loans can be used to pay up to eight weeks of payroll costs, including benefits and other costs. SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. Loans also will be forgiven if the employer quickly rehires employees and maintains salary levels. Forgiveness will be reduced if full-time headcount declines or if salaries and wages decrease. At least 75 percent of the forgiven loan amount must have been used for payroll.

Deferral and fees
The PPP loan has a maturity of two years and an interest rate of 0.5 percent. Loan payments will be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees. An employer who receives a loan under the PPP is not eligible to also claim an employee retention credit under the $2.2 trillion CARES ACT economic relief package passed by Congress in response to the COVID-19 pandemic. The employee retention credit gives eligible employers whose business operations are fully or partially suspended due to the COVID-19 pandemic a credit against employment taxes equal to 50 percent of qualified wages (up to $10,000 in wages) for each employee.

Applying
All businesses with 500 or fewer employees, including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors, can apply for a PPP loan. The application form can be found at the U.S. Department of Treasury website, https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf.

Borrowers can apply through any existing SBA lender, or through any participating federally insured depository institution, federally insured credit union, and Farm Credit System institution. Additional lenders will come on stream once they are approved and enrolled in the program. In the meantime, check with your local bank to see if it is a participant. Visit www.sba.gov for a list of SBA lenders.

Venture- and angel-backed firms may be left out
The Information Technology and Innovation Foundation (ITIF), a science and technology policy think tank, says existing U.S. Small Business Administration (SBA) regulations governing small businesses with affiliates will exclude some small venture- and angel-capital-backed firms from receiving aid under the $370 billion Paycheck Protection Program. The program is operated by the SBA. According to the ITIF, under SBA rules a 10 percent venture-backed startup can be defined as a large business if more than 50 percent of its equity comes from a venture capital firm whose portfolio companies collectively employ more than 500 workers.

Currently, SBA’s affiliation standards are waived for small businesses in the hotel and food services industries; that are franchises in the SBA’s Franchise Directory; or that receive financial assistance from small business investment companies licensed by the SBA. Additional guidance may be released as appropriate.

Citing more than 83,000 venture- and angel-backed firms in the United States, the group says that absent a waiver of the affiliation, these firms might not receive needed assistance and will be forced to directly lay off about 279,000 workers, which indirectly will impact more than one million jobs nationwide. “At the end of a 10 year-period, because of the additional closures of these normally high-growth firms, there will be 703,000 fewer workers in venture- and angel-backed firms,” it argues. ITIF is urging the Trump administration to waive the affiliation rule as it implements the relief package.

Gender payrolls
Meanwhile, half of 50 leading U.S. companies received a failing grade in the third annual Gender Pay Scorecard newly released by investment manager Arjuna Capital and Proxy Impact. Three companies—Starbucks, Mastercard, and Citigroup—received an “A” grade. Top firms receiving “F” include Goldman Sachs, Oracle, McDonalds, and Walmart. Ten companies—Nike, Bank of New York Mellon, Progressive Insurance, Pfizer, JP Morgan, Wells Fargo, Apple, Intel, American Express, and Bank of America—garnered a “B” grade for their efforts to disclose and act on their gender and racial pay gaps.

Globally, the average income for women is only 53 percent of the income of men, and it will take 257 years to close that $10,000 per year gap, the Scorecard shows. In the United States, women working full time earn 82 percent of that of their male peers, a $10,122 per year gap. This disparity can add up to nearly half a million dollars over the course of a career.

For African-American, Native, and Latina women, the career earnings gap is close to $1 million dollars. The weekly median earnings for African-American and Latina women are 62 percent and 54 percent of that of their male peers, respectively. At the current rate of change in the U.S., women will not reach pay parity until 2059, while African American women will have to wait until 2130, and Latina women until 2224.