More than 400 Dale County businesses were the recipients of the loans first established to provide an economic incentive during the COVID-19 pandemic.
That was the news that Ozark Dale County Economic Development Corporation Executive Director Veronica Crock brought to those attending the Dale County Commission meeting July 14.
Crock said that 413 businesses in Dale County received the national “Small Business Paycheck Protection Program” loans which began accepting applications April 3 to provide an economic incentive for small businesses with 500 or fewer employees to keep or rehire their workers.
Implemented by the United States Small Business Administration with support from the Department of the Treasury, the PPP is a $349 billion emergency loan program created by President Donald Trump’s signing of the Coronavirus Aid, Relief and Economic Security Act (CARES).
The program provides forgivable loans up to $10 million to small businesses left financially stressed by the COVID-19 pandemic. The loans, administered at the local level by banks and credit unions, were designed to provide small businesses with funds to pay up to eight weeks of payroll costs, including benefits.
Crock said that some 3,458 jobs in Dale County were retained as a result of the PPP. “The PPP loan amount for just those 413 businesses exceeds $20 million,” Crock said.
Backed 100 percent by the SBA, the loans are provided to small businesses without collateral requirements, personal guarantees, SBA fees or credit elsewhere tests.
The CARES Act was signed into law March 27 and the Small Business Administration announced that the first day banks would accept PPP loan applications was April 3.
Those eligible for the PPP included small businesses, certain non-profits, veterans’ organizations, self-employed individuals, independent contractors and other businesses meeting size standards based on their North American Industry Classification System code, according to the SBA.
On June 3, the United States Senate approved a bill that was initiated in the United States House of Representatives which provided some flexibility to the initial PPP loans constraints. Called H.R. 7010, the bill was initiated because as many small businesses began the process of the varying stages of state-authorized reopening, the need for more flexibility for the terms of their PPP loans was realized.
The Flexibility Act essentially created a safe harbor for businesses that are required to open at only 50 percent capacity.
The act extends the forgiveness period from eight weeks to 24 weeks although small businesses that prefer to stay within the original eight-week window can opt-out of the extension.
The current PPP requires that 75 percent of the loan must be used on payroll costs and 25 percent to be used on mortgage interest, rent and utilities. Failure to adhere to this rule impacts loan forgiveness.
Under the Flexibility Act, the 75/25 rule is replaced with a 60/40 percent rule.
Also under the Flexibility Act, all new PPP loans will have a five-year maturity. Existing loans will remain at the two-year maturity. It allows businesses that receive loan-forgiveness to also receive payroll tax deferment. To receive loan forgiveness, a business must rehire employees by Dec. 31.