On March 27, 2020, the CARES Act was enacted to assist small businesses that have been economically affected due to COVID-19. Efforts to combat the virus were implemented statewide – which included lockdowns, closures, as well as new regulations that were put in place to protect businesses. Also, federal programs were modified to help businesses weather the current economic situation.
The CARES Act provided a new program - the Paycheck Protection Program (PPP), which was focused on encouraging employers to retain employees and maintain salaries during the rest of 2020. This program closed on Aug. 8, 2020, and it is now in its important second phase, the loan forgiveness.
To be eligible for forgiveness, the borrower should use the loan proceeds for the payment of payroll, rent, utilities and mortgage interests, as they meet the requirements set forth in the program. These expenses must be paid during the covered period, which began on the date the loan was disbursed and will last for up to 24 weeks, but in no event may the covered period extend beyond Dec. 31, 2020.
“It is important to note that the amount forgiven is directly tied to the number of full-time employees, wages and salaries. A reduction in any of these will result in a reduction in the forgiveness amount,” explained Marta Rodríguez, senior advisory manager at Kevane Grant Thornton.
The borrower has 10 months after the completion of the covered period to file a forgiveness application request with their loan provider. If the loan is fully forgiven, the borrower will not be responsible for payments. Any amount deemed not forgiven will be converted into a five-year term loan, bearing interest at 1 percent.
Private Sector Payroll Protection Program
On May 14, 2020, Gov. Wanda Vázquez announced the Coronavirus Relief Fund, , also known as the “PPP Criollo,” which allotted $350 million in immediate funds accessible to private employers who have operated throughout the COVID-19 pandemic.
Since Sept. 14, applicants have been able to submit their applications for the “PPP Criollo” through SURI, where they will also be notified about funding decisions. Grants will be disbursed in a first-come, first-served basis until fully disbursed.
The awards are calculated as the lesser of the total decrease in net income during the second 2020 quarter when compared to the company’s 2019 second quarter, or the number of employees times a specified industry rate (included in the program guidelines). These grants will take into consideration any funds received under other local or federal programs.
Companies receiving this grant will similarly need to demonstrate that it kept payrolls at the same levels for at least eight weeks, starting on the date the grant is awarded. Available awards will be distributed to eligible employers that meet the criteria defined in the program.
Eligibility Criteria
- Private employer with 500 employees or fewer
- Gross income of $10,000,000 or less
- Operating since March 15, 2020 with employees that received payroll
- Registered in the Merchants Registry of the Department of the Treasury
- Maintain documentation that reliably demonstrates the expenses relating to COVID-19 from March 1, 2020 through Dec. 31, 2020
“Businesses that familiarize themselves with the PPP forgiveness program and the Coronavirus Relief Funds grants are one step closer to ensuring that their businesses come out of the pandemic as strong as ever,” Rodríguez said.
