paycheck protection program

An SBA loan that helps businesses keep their workforce employed during the Coronavirus (COVID-19) crisis.

 

Who can apply?

This program is for any small business with less than 500 employees (including sole proprietorship's, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19.

Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.

Small businesses in the hospitality and food industry with more than one location could also be eligible if their individual locations employ less than 500 workers.

How to Apply?

Contact your bank to determine if they are an SBA lender or visit this link.  You bank will be able to walk you through their application process.

SBA Application & Guidance on Paycheck Protection Program

Visit this link for guidance from the SBA on the Paycheck Protection Program.

US Chamber of Commerce COVID-19 Emergency Loan Guide

The US Chamber of Commerce issued this document regarding the details of Paycheck Protection Program  US Chamber of Commerce COVID-19 Emergency Loan Guide  .

US Department of Treasury Assistance for Small Businesses

The US Department of Treasury has additional information on their site via the link provided below, from top-line overview of the program, lender and borrower information as well as the application for the borrower.

US Department Of The Treasury - Assistance for Small Businesses   

 

Loan Details and Forgiveness

Paycheck Protection Program (PPP) Flexibility Act

June 5, 2020

President Trump signed the Paycheck Protection Program (PPP) Flexibility Act which made some significant changes in how the PPP loan can be used as well as forgiveness.

We will be updating our PPP Loan Forgiveness guidance in the coming days and weeks as more guidance on the changes to PPP loan forgiveness is provided by the SBA; however, here are the highlights of the recent changes:

  • 24 Weeks to spend funds, rather then 8 weeks.
  • Must spend 60% of the loan on payroll costs. However, if you do not spend at least 60% on the payroll, then the loan may not be forgiven at all.
  • The covered period of the loan is extended to December 31, 2020 rather than June 30, 2020.
  • Business owners do not have to make employer payroll tax payments through the end of 2020.
  • If an employee declines to return to their job, the business will not lose any loan forgiveness eligibility.
  • For those loans not forgiven, the payback period has been extended to a minimum of 5 years.

SBA and Treasure Release Paycheck Protection Program Loan Forgiveness Application

May 15, 2020

The SBA in consultation with the Department of the Treasury, released the Paycheck Protection Program (PPP) Loan Forgiveness Application and detailed instructions for the application.  The link below will take you to the details as well as the application.

SBA & Treasury Loan Forgiveness Application

Visit the SBA link direct to Paycheck Protection Program Loan and Forgiveness Details

Paycheck Protection Program (PPP)

The SBA’s PPP loans are easy to qualify for, have a low interest rate (1%) and eligible for complete “forgiveness.”  This means that you may not owe anything at the end of the eight (8) week period after your loan is funded.  You can borrow up to 2.5 times your monthly payroll cost.  However, if you received a PPP loan, you must apply for forgiveness within 90 days after the 8 week period ends.  

In general, the loan must be used for:

  • 75% Payroll Expenses;
  • 25% Other expenses like rent, utilities, mortgage, interest, etc.;
  • Employee headcount must remain consistent with the first quarter of 2020;
  • Employee wages must be 75% of their wages in the first quarter of 2020.

The SBA has not finalized the guidance and criteria for full forgiveness of these loans.  This is NOT an all inclusive list you must consult with your lender, the SBA as well as our resource page for updates.

PPP Loan Forgiveness

First, you must spend the loan on approved expenses in order for it to be eligible for forgiveness. The loan is designed to help with payments that many business owners are struggling with right now, including: 

  • Payroll costs
  • Interest for mortgages and certain debt
  • Rent
  • Utilities
  • Employer Portion of Health Care Benefits
  • Additional wages for tipped employees

Mortgages and lease agreements must have been signed before February 15, 2020. Interest on debt must also have been incurred prior to February 15, 2020.

If you use any part of your PPP loan for expenses not on this list, that amount cannot be forgiven. Again, only 25% of your loan can be used for the non-payroll costs mentioned above if you want the full loan amount to be forgiven.

Lastly, in order to qualify for full loan forgiveness, you must maintain your employee headcount and their compensation levels. If you’ve made any staffing or wage reductions between February 15, 2020 and the end of the eight-week period following disbursement of your loan, you have until June 30, 2020 to rehire employees and restore salary levels. Otherwise, your forgiveness amount will be reduced. 

There are many questions about the forgiveness criteria that still require clarification from the SBA and government so you should check regularly for updates and confirm with your lender for their specific requirements.

Payroll Cost

According the loan provisions, forgivable payroll costs include:

  • Salary, wages, commissions, or tips
  • There is a limit on employees that earn more than $100,000 annually.  These wages will need to be prorated to the eight-week period for each employee. 
  • Sole proprietor or independent contractor applying themselves payroll costs can include wages, commissions, income, or net earnings from self-employment (capped at $100,000 per year).
  • For tipped employees, you can pay wages to cover what they would normally have earned.
  • Paid time off and leave

If you’re using credits from the FFCRA for any of the above, those amounts are not eligible for forgiveness.

  • Employee benefits, including group health insurance premiums and payment of any retirement benefit
  • This includes: 
    • Health insurance 
    • Dental and vision
    • FSAs
    • HRAs 
  • This does not include:
    • HSAs 
    • Group term life plans 
    • Long-term and short-term disability plans
  • Commuter benefits
  • State and local taxes

The SBA and government have not issue clear guidance on the forgiveness of FICA, RRTA, or federal income taxes reported on Form 941.  These taxes may not be able to get forgiveness. 

Applying for Loan Forgiveness

At the end of the 8 weeks, you should be prepared to provide documentation on all the approved uses of the loan to apply for full forgiveness.  

  • Documentation of the number of full-time employees and the wages paid during the eight-week loan period
  • State and Federal Payroll Tax Returns
  • Proof of payment, including cancelled checks, receipts, and other documentation that verifies payments for mortgage, lease, and utility payments
  • A certification that all the information you provide is accurate and that your loan was used to retain employees, or make rent, mortgage, or utility payments

Be sure to check with your lender to determine if any additional information is required.


Preparing for Loan Forgiveness

 

  1. To put yourself in the best position for full loan forgiveness make sure you keep detailed records of your eligible expenses during the 8 week period.  Refer back to the list of forgivable expenses often as they may change as your lender, the SBA and Government issue more guidance.  Remember, you can only use 25% of the loan’s funds for non-payroll related expenses.
  2. Make sure you have your payroll reports and liability reports prepared and ready.  These reports should detail the actual payroll processed during the 8 week period as well as the federal and state payroll tax filings, including, any employer contributions to health premiums and unemployment insurance. Your financial advisor or payroll provider can help you prepare this report. 
  3. Keep detailed records and proof of payment for your forgivable non-payroll expenses, including, rent, mortgage interest, utility payments, etc. 
  4. Confirm with your lender all the documentation and requirements that they have to get your loan forgiven.  Be sure to have everything that you lender requires and submit your forgiveness application to your lender with the proper documentation within 90 days after the final day of your eight-week loan period.  You should be in touch with your lender at the beginning of the 90 days to ensure you have everything that will be required.

Reduction in Forgiveness 

If an employee’s wages are reduced by more than 25% during the 8 week period compared to a look-back period, the amount forgiven will be reduced. If your employee headcount is reduced as compared to a look-back period, the amount forgiven will be reduced.  The CARES Act states that as long as you rehire your employees and restore wages by June 30, 2020, reductions of your forgiveness amount can be waived.  Guidance on this not been released, so check with your lender for updates.

If you spend more than 25% of your loan on non-payroll costs, you may not be eligible for forgiveness. Guidance on this not been released, so check with your lender for updates.

Lenders have 60 days from that date that you apply for forgiveness to decide whether or not you qualify.  If all or a portion of your loan is not forgiven, the un-forgiven portion will turn into a 1% loan for two (2) years and payments will be deferred for six (6) months.  Any forgiven loans will be excluded from gross income for tax purposes.

UPDATEMay 3, 2020, the SBA clarified that if a terminated employee rejects a good faith, written offer from the borrower to re-hire the employee at the same salary and for the same number of hours, loan forgiveness will not be reduced with respect to that employee, provided that the borrower has documented the offer and the employee’s rejection of the offer.

As much of the guidance on loan forgiveness is still pending, please be sure to check back here often as well as following up with your lender, the SBA and Government.