Please ensure Javascript is enabled for purposes of website accessibility

You Have Less Than 2 Weeks to Benefit From This COVID-19 Relief Program

By Maurie Backman – Updated Jun 17, 2020 at 4:56PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Get moving to capitalize on an extremely affordable way to borrow money.

Though the U.S. economy on a whole has felt the wrath of COVID-19 -- to the point where we're officially in a recession -- small businesses have been particularly hard-hit. Early restrictions caused many local establishments to close their doors, and while some were able to adapt their business models by pivoting to online service, others have suffered catastrophic financial losses over the past three months. Fortunately, relief programs have been available for small businesses that have been impacted by COVID-19; perhaps the most notable of these is the Paycheck Protection Program (PPP).

The purpose of PPP loans is to allow businesses to retain and keep paying staff in the face of economic uncertainty. What makes them particularly attractive is the fact that they're potentially 100% forgivable. And while the PPP program notably ran out of money during its first go-round, a second influx of funding opened the door to more applicants in April.

Smiling man in apron standing in restaurant doorway, next to a sign saying Open

Image source: Getty Images.

In fact, there's still PPP money to be had, provided your business qualifies. But at this point, you don't want to delay: You only have until June 30 to get your PPP loan application approved. So if you've been thinking about applying for relief, now's the time to get moving.

The upside of PPP loans

PPP loans are forgivable under a certain set of circumstances, and not every business can fulfill those requirements. To get your loan forgiven in full, you must spend 60% of its proceeds on payroll costs. This is a change from the original rules, which initially stated that businesses had to spend 75% of their loan proceeds on payroll to qualify for forgiveness.

Furthermore, in their original form, PPP loans were more restrictive in that proceeds had to be used up within eight weeks for forgiveness to be on the table. That time frame has since been extended to 24 weeks, giving business owners more time to spend those funds as they see fit.

Another thing you should know about the PPP is that even if your loan isn't fully forgivable, or forgivable at all, it's still an affordable way to borrow. PPP loans have a two-year maturity and an interest rate of 1%, which is pretty negligible. Therefore, if you need money for near-term expenses, it may be a good idea to apply, even if you know you won't qualify for forgiveness.

That said, the maximum amount you're eligible to borrow is two-and-a-half times your monthly payroll costs from 2019. If you didn't have payroll costs back then, you can take your average payroll costs from earlier this year to determine your loan amount.

Either way, act quickly if you want to end up receiving a PPP loan. At a time like this, it never hurts to have extra cash on hand. Even if your business has been doing better in recent weeks, we don't know whether a second wave of COVID-19 will spur a massive lockdown all over again. If your business is grappling with economic uncertainty, you may want to put in an application.

The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
332%
 
S&P 500 Returns
104%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.