What is PPP Loan?

In United State, government has initiated PPP Loan to help small businesses during economic crises, like the COVID-19 pandemic

Author - Coinfinancemoney ()Tushar Mistari Image Source - Google & Canva

In March 2020, It was created as part of the CARES Act, later extended and modified by subsequent legislation

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The primary goal of the PPP loan is to provide financial support to small businesses to retain their employees and cover operational expenses

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Loan is provided by lenders, including banks and credit unions, loan administered by the Small Business Administration (SBA)

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PPP loans can be used for payroll costs, rent, utilities, mortgage interest, and certain other qualified expenses etc.

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If at least 60% of the loan amounts is used in payroll expenses then PPP loan is forgivable for such businesses.

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To qualify for the loan business should be operational before 15 Feb 2020, and have certain number of employees 500 or fewer than 500

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Self-employed individuals, independent contractors, and sole proprietors are also eligible to apply for PPP loans.

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The loan amount usually calculated based on business's average monthly payroll costs, multiplied by a factor (2.5 or 3.5)

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PPP loan has maturity of 5 years and low fixed interest rate, which is around 1%

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Entire application process and rules associated with it are depends on lenders, during the loan application period

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The PPP program has gone through multiple rounds of funding and changes, with updates made to address issues

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