The Paycheck Protection Program would provide cash assistance to employers who maintain their payroll during this emergency, which would help workers remain employed, as well as help affected small business. If employers maintain their payroll, the loans could be forgiven under certain circumstances. PPP has a lot of great features, such as forgiveness of up to 8 weeks of payroll, mortgage, utilities, etc. Based on employee retention and salary levels, no SBA fees and at least six months of deferral with maximum deferrals of up to a year. If there is debt forgiveness on the loan, it is not considered taxable income to the recipient.
You would be able to apply if harmed by COVID-19 between February 15, 2020 and June 30, 2020. This program is retroactive to February 15, 2020, in order to help bring workers who may have already been laid off back onto payrolls. Loans are available through June 30, 2020. This loan requires borrowers to make good faith certifications that they have been impacted by COVID-19 and will use the funds to retain workers and maintain payroll and other debt obligations.
Q&A
Q: What types of businesses and entities are eligible for a PPP loan?
A: The following are eligible:
• Businesses and entities that must have been in operation on February 15, 2020.
• Churches and other 501c3 nonprofit organizations.
• Individuals who operate a sole proprietorship or as an independent contractor and eligible self-employed individuals.
• Gig workers, those that receive 1099s, like Uber drivers.
Q: How much can you borrow?
A: Depending on your business’s situation, the loan size will be calculated in different ways (see below). The maximum loan amount is $10 million. For most, if you were in business February 15, 2019 – June 30, 2019: your max loan is equal to 250 percent of your average monthly payroll costs during that time period.
Costs eligible for payroll are:
• Compensation (salary, wage, commission, or similar compensation, payment of cash tip or equivalent).
• Payment for vacation, parental, family, medical or sick leave
• Allowance for dismissal or separation.
• Payment required for the provisions of group health care benefits, including insurance premiums.
• Payment of any retirement benefit.
• Payment of State or local tax assessed on the compensation of employees.
Costs NOT eligible for payroll are:
• Employee/Owner compensation over $100,000.
• Compensation of Employees whose principal place of residence is outside of the US.
• Qualified sick and family leave for which a credit is allowed for the Families First Coronavirus Response Act (more on this to come). Look for updates.
Q: What are allowable uses of the loan proceeds?
A: Uses of loan proceeds:
• Payroll costs (as noted above with the exclusions noted above).
• Payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation.
• Rent (included rent under a lease agreement).
• Utilities.
• Interest on any other debt obligation that were incurred before the covered period.
Q: What are the loan terms, interest rate and fees?
A: If you don’t meet the requirements below for a forgiveness of the loan, the loan is converted to a maximum of 10 years, maximum 4 percent loan.
Q: Can the loan payments be deferred?
A: Yes, it can be deferred for no less than six months and no more than one year. However, during the deferment period interest will still accrue.
Q: Can this loan be forgiven?
A: Yes, portions of the loan can be forgiven with certain considerations and documentation. In order for the loan to be forgiven the company has to continue to pay the same number of full-time equivalent workers during the eight-week period the forgiveness will be based upon.
Q: How is the debt forgiveness calculated?
A: Forgiveness of the loan is given based on an 8-week period from the date of the loan. Employee’s who make over $100,000 are excluded from the calculation to secure debt forgiveness. Payroll costs plus any payment of interest on any covered mortgage obligation plus any payment on any covered rent obligation plus and covered utility payment are included in the calculation.
Q: How do I apply for the PPP Loan Program?
A: The CARES Act has provided extra funding to banks who administer the SBA loan programs. Banks are still in the process of creating this program and several will have an online application process once fully implemented. This all should be setup by various banks, backed by the SBA fairly quickly. The SBA will establish application fee caps for lenders that charge for this process.
Q: How do I get forgiveness on my PPP Loan?
A: You must apply through your lender for forgiveness on your loan. The same bank used to secure the PPP loan is the bank you will need to go through to secure debt forgiveness. In the application, you must include the following documentation to apply for debt forgiveness:
• Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filing and State income, payroll and unemployment insurance filings.
• Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings.
• Documentation verifying payments on covered mortgage obligations, lease obligations and utilities.
• Certification from a representative of your business or organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with the programs guidelines for use.
Q: Can I also apply for other SBA Loans, such as the Economic Injury Disaster Loan?
A: Yes, borrowers may apply for PPP Loans and other SBA financial assistance, including Economic Injury Disaster Loans (EIDLs), as long as your PPP loan isn’t used for the same purpose as the other SBA loans. Churches and other public nonprofits (501c3) orgs are not allowed to apply for the EIDLs loans; all other businesses can apply for both CARES programs.
Q: Is there a personal guarantee required?
A: No, unlike the EIDL, there is not a requirement to personally guarantee this loan. There is also no collateral required.
Q: After application, how long does it take to secure the funding?
A: This is still uncertain, however, most have stated funding could be received (after application acceptance) within 36 hours.