How Businesses Can Keep Employees on the Payroll

SBA’s Paycheck Protection Program Explained

As COVID-19 (coronavirus) consequences upend normal operations, businesses and nonprofits that need help figuring out how to keep their employees on the payroll are finding that assistance in the Small Business Association’s (SBA) Paycheck Protection Program.

The initiative provides 100% federally guaranteed loans for up to 2½ times your average monthly payroll costs (up to $10 million) to help small businesses keep workers employed amid the pandemic and economic downturn. Borrowers who follow certain requirements – such as keeping all employees on the payroll for 8 weeks and using the funds for payroll, rent, mortgage interest or utilities – can have the loans forgiven.

As an SBA-approved lender, Bell Bank processed more than 1,300 loans April 3-10 – the first week the program became available.

“This is essentially a grant from the federal government to help businesses overcome what could otherwise be an almost insurmountable obstacle,” explains Paul Flood, Bell’s SBA lending manager and a veteran SBA lender. “Businesses are intrinsically woven into the fabric of our communities – providing products and services that enhance their customers’ lives, supporting local organizations, and contributing to the overall culture. We will need them when this is all over, so it’s incredibly important that we do what we can to support them now.”

Eligibility for SBA’s Paycheck Protection Program

If you’re considering applying for the SBA’s Paycheck Protection Program, there are a few things you need to know. The program is available through June 30, 2020, for:

Businesses with 500 employees or fewer

Individuals who operate sole proprietorships

Independent contractors

Self-employed individuals who regularly maintain a trade or business

501(c)(3) nonprofit organizations with 500 employees or fewer

Some 501(c)(19) veterans organizations and tribal businesses that meet SBA size standards

Businesses with more than 500 employees in certain industries that meet SBA size standards (You can calculate your business size here.)

Hospitality and food industry businesses at the store and location level, if the location has 500 employees or fewer

Note: Employees include all full- and part-time workers and staff of any other payroll status.

How to Apply for the SBA’s Paycheck Protection Program

You can apply for the program through any existing SBA 7(a) lender or participating federally insured depository institution (like Bell Bank), federally insured credit union or Farm Credit System institution.

Lenders will take the following 5 factors into consideration:

1. Whether you were operating before February 15, 2020, and paid employees or independent contractors
2. Whether you need the loan to support ongoing operations due to the uncertainty of current economic conditions
3. Whether you will use the funds to retain workers and maintain payroll or make mortgage, lease, and utility payments
4. Whether you have an application pending for a similar loan
5. Whether you have received a similar loan since Feb. 15, 2020 (Note: It may be possible to fold emergency loans made since Jan. 31, 2020, into a new loan.)

“Having spent most of my career working with businesses, I am thrilled to be able to work with them on a solution to help circumvent this uncertain time,” remarks Paul, who is leading Bell’s newest lending team, Bell Bank SBA, focused on helping businesses that might not usually qualify for traditional commercial financing. “Business owners are creative, innovative and resourceful, and I am amazed by all of the inventive methods they’re implementing to keep their businesses going on their own. I truly believe this time of crisis will make us stronger in the end. For now, I hope this Paycheck Protection Program will give some of our business owners the peace of mind they have desperately needed.”

How to Ensure Your SBA Payroll Protection Program Loan Is Forgiven

Collateral and personal guarantees are not required for these SBA Payroll Protection Program loans.

To make sure your loan is eligible to be fully forgiven:

Use the funds for payroll costs, mortgage interest, rent, and utilities

Use at least 75% of the amount you want forgiven for payroll costs

Maintain or quickly rehire employees and maintain salary levels (forgiveness amounts will be reduced if your full-time headcount declines or salaries and wages decrease)

If your loan is not fully forgiven, you will have 6 months before you have to start making loan payments. Loans, which have an interest rate capped at 1%, will be due in 2 years.

To learn more about Bell Bank SBA, visit SBA-Loans.