There is a reason that many people joke that the nine most terrifying words in the English language are “I’m from the government and I’m here to help,” because it seems that whenever the government offers a solution to a problem often times the solution is not any better than the problem itself. When the Cares Act was passed on March 27, 2020 many small business owners believed that they would receive a lifeline to help keep their businesses afloat while the country went into lock down because of the COVID pandemic. Unfortunately many small business owners are coming to the realization that Paycheck Protection Program (PPP) is not going to be the salvation that they have been waiting for.
Unfortunately a lot has been written about the PPP and most of that information as of April 3, 2020 is inaccurate and outdated as the government changed many parts of the program. Below are some of the most common rumors that are still circulating online and the facts you need to decide if it is even worth your time and effort to apply for a PPP loan.
Remember the government doesn’t give anyone anything for free. Unless of course you are a bank, an airline, a car manufacturer, or any other business considered too big to let fail. The rest of us have to jump through a lot of hoops and one misstep means your business could be on the hook for a loan you aren’t able to repay.
The reality is that the rules of the PPP loan keep changing and what may have been true three weeks ago, three days ago or three hours ago may not be relevant or valid any longer. Below are the rumors and the facts using the updated PPP documentation that is available on the SBA website.
RUMOR
The interest rate on PPP loans will be 0.5%.
FACT
The interest rate on PPP loans is 1%.
RUMOR
You can apply at any bank for a PPP loan.
FACT
Only approved SBA lenders will be offering PPP loans. Note that many of the larger banks such as Chase and Wells Fargo will only be accepting applications from businesses that have had a banking relationship with them on or before February 15, 2020.
List of SBA approved lenders here
RUMOR
The entire PPP loan is forgivable if you use it to pay payroll taxes, utilities or other business related expenses.
FACT
According to the SBA the PPP loan will be fully forgiven if the funds are used for:
Payroll costs (at least 75% of the forgiven amount must have been used for payroll).
Interest on mortgages, rent, and utilities.
Get the full details directly from the SBA here.
RUMOR
The terms of PPP loans is 10 years.
FACT
The PPP loan term is 2 years.
RUMOR
The PPP loan will be available to everyone who wants to apply.
FACT
The PPP loan is available on a first come first served basis. The program only has a limited amount of money and when that runs out that’s it.
RUMOR
Payments and interest are deferred for up to 1 year.
FACT
Payments on the PPP are deferred for 6 months following the date of disbursement of the loan. However, interest will continue to accrue on PPP loans during this six-month deferment.
Download the updated PPP documentation here so you have the facts about the terms and conditions of this program.
