Small businesses interested in PPP loans may begin applying today, note slight change in interest rates
BATON ROUGE - Earlier this week, the Baton Rouge Area Chamber (BRAC) urged local business owners interested in obtaining loans from the Paycheck Protection Program (PPP) to ready their application paperwork.
As of Friday, April 3, the application period has been opened.
Those interested in applying for a loan should follow five basic steps, which are listed below:
1. Download and fill out the application.
2. Gather up documents necessary to establish eligibility (i.e.: payroll processor records, payroll tax filings, Form 1099-MISC, income and expenses for sole proprietorships, or bank records sufficient to demonstrate qualifying payroll amount)
3.Consider using an agent to help you in applying for your loan. Agent fees are paid out of lender fees, not from applicants. They are attorneys, accountants, consultants or others who prepare or assist with your application or represent you in conducting business with the Small Business Administration. If you will use an agent to assist you, contact them.
4. Contact your commercial lender. You can start with the lender you already use. Ask them about their participation in the Paycheck Protection Program and whether you can submit your application to them. If they are not participating, you can find a non-exhaustive list of other area lenders on www.brac.org/recovery under the Business Resources section.
5. Talk to your lender about loan forgiveness and ask about what you will need to submit to request loan forgiveness. You will need to submit documents verifying the number of full-time equivalent employees and pay rates, as well as payments on mortgage, lease, and utility obligations. Ask your lender for more details.
Applicants should also take note of a change in the Small Business Association's anticipated interest rate for PPP loans. Previous interim guidance set the loans at a fixed 0.5%; the interim final guidance sets the interest rate at 1%.
“The rate change could provide a little comfort to lenders and a little more hope to borrowers,” said Liz Smith, Senior Vice President for Economic Competitiveness at the Baton Rouge Area Chamber. “It remains to be seen whether area lenders agree that the interest rate bump makes the loans appealing. It’s critical that these loans are attractive to both lenders and borrowers to get these dollars actually paying paychecks.”
The rate change is still significantly lower than the 4% maximum provided for in the CARES Act.
Lending entities have expressed concern that the low-interest rate and waiver of standard financial eligibility minimums would create intolerable losses in offering PPP loans. The guidance positions the 1% interest rate as attractive relative to comparable maturities.
Also clarified in the guidance are definitions of eligible and ineligible entities and expenses, as well as terms, maturity date, and other key features of the loan. The guidance also outlines records and documentation that must be provided to establish eligibility.
Affiliation rules have not yet received full guidance, and this interim final document notes that the applicability of affiliation (or franchise) rules will be addressed with additional guidance soon.
The guidance encourages borrowers to seek the full available amount of the loan of $10 million, as it strictly notes that only one loan per borrower will be allowed. It notes that the PPP is “first-come, first-serve,” underlining BRAC’s earlier urging to small businesses to apply as soon as possible to avoid running up against the funding cap.
Click here to obtain the final application for borrowers.
And click here for a comprehensive overview of the program.
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