The Important PPP Loan Details for Entertainment Businesses
On December 27th, in response to the continued financial struggles with COVID-19, the U.S. government passed a new $900 billion stimulus package. About $284 billion of that bill includes additional funding for the Paycheck Protection Program (PPP) to help small businesses that continue to struggle financially with the challenges of the pandemic.
Since the entertainment industry has been among the most negatively impacted by the pandemic, we thought it was important to provide a brief overview of the PPP loan details. This is not an exhaustive analysis (trust us, we have better things to do than writing a 75 page examination of the bill), but rather a high-level summary to highlight the important points. At the end of this article, we’ve provided a list of some additional resources that can give you more information and further specific details. Here’s what you need to know:
The first and most important question: “Is my business eligible?” You are eligible if you:
- Have suffered revenue declines of more than 25% in any quarter in 2020
- Do not employ more than 300 employees per physical location
- Have used or will use the full amount of your first PPP loan on eligible expenses (to receive a second loan)
- Demonstrate at least a 25 percent reduction in gross receipts in the first, second, third or fourth quarter of 2020 relative to the same 2019 quarter (or under the applicable timelines for businesses that were not in operation in Q1, Q2, and Q3, and Q4 of 2019)
Most FECs will meet these criteria; however, make sure to reach out to your lender if you have questions.
PPP Loan Details
Let’s look at some more details about the program:
- Borrowers may receive a loan amount up to 2.5 times the average monthly payroll cost
- The maximum loan amount is $10 million
- Loans are 100% guaranteed by the SBA and forgivable if the proceeds are used for forgivable expenses
- If a business uses at least 60% of the loan on payroll expenses and maintains its employment levels during the covered period of the loan, it can apply to have the loan forgiven (meaning you can use up to 40% of the money for other expenses such as rent, utilities, etc.)
- If not forgiven, loan amounts will accrue interest at a fixed rate of 1.00% and have a 5-year maturity
The exact date that the loan money will be available to all small businesses is not yet confirmed, but it is likely going to be the week of January 18.
This new round of PPP funding is a great opportunity for FECs and all businesses in the entertainment industry to get financial assistance to help keep their business afloat during these tough times. With loan forgiveness opportunities, a low interest rate and flexibility of use, the features of the loan are very favorable. This isn’t an opportunity you want to pass up! Make sure to reach out to your bank or lending institution to begin the discussion.