At Dinote we’re doing our part to socially distance, and support the online business community by extending our Pro plan subscription to help aid in accessing non-dilutive capital. Additionally, you’ve probably heard about the US Coronavirus Aid, Relief, and Economic Security (CARES) Act and its $350 billion Paycheck Protection Program (PPP) loan package by now. We wanted to take a moment to share a quick overview of how the PPP might apply to startups.
Will my startup qualify for a PPP loan?
If you’re a bootstrapped company or a seed stage startup that raised a SAFE/convertible seed round, you’ll probably qualify. If you’re VC-backed, the current rules are slightly ambiguous; if your investor has significant control over your company (e.g. they have over 50% ownership or possess certain covenants), you might not qualify. We should have more guidance on this within the next week.
How large of a loan can I receive?
You’ll be able to get roughly 2.5x of your last year’s average monthly payroll as a PPP loan, with certain caveats—for example, employees with salaries over $100k can only have up to $100k of their salary counted towards monthly payroll.
Is the loan forgivable?
The loan is fully forgivable if used within 8 weeks of origination on payroll, rent, utilities, or mortgage payments. Since the loan is based on your previous year’s payroll, if you’ve reduced salary or headcount, part of the loan might not be forgivable.
What happens if my loan isn’t forgiven?
Repayment on the part of the loan that isn’t forgiven can be deferred 6-12 months, and interest on repayment is capped at 4%.
Are there application fees or personal guarantees?
Applying is free, and founders aren’t required to give a personal guarantee on the loan.
What’s the timing on this?
Applications haven’t yet opened, but you’ll be able to apply the loan to costs up till June 30th, 2020.
We’ve collected a handful of guides and links that may help leaders across any type of business:
- The Gates Foundation’s materials on COVID-19
- LessWrong: curated list of information, papers, and articles about the coronavirus
- List of experts we're following on Twitter who are closely tracking developments
- Indie Hackers COVID-19 discussion forum for bootstrapped founders
- Guide to managing founder stress
- Fundraising in a downturn: Finding investors and building the narrative (Carta)
- How to virtually pitch VCs (Jane VC)
- Investment decisions in a pandemic world (Haystack)
- Reading list for leaders in uncertain times (Andreessen Horowitz)
- Remote work emergency plan: What to do (and where to start) (GitHub)
- Six startup disciplines for challenging times (Redpoint)
- Some perspectives on startup financing in a downturn (Tribe Capital)
- The coronavirus crisis doesn’t have to lead to layoffs (Harvard Business Review)
- The hard questions venture capital GPs need to be prepared for (Kauffman Fellows)
- The matrix for COVID-19 (Sequoia)