PAYCHECK PROTECTION PROGRAM LOANS
We understand that these are challenging times and a small business like yours needs any help possible. We are here to make the SBA Paycheck Protection Program application process streamlined and easier.
PPP PROGRAM INFO
The Paycheck Protection Program (PPP) is a new loan program for small businesses. The program will be administered by the Small Business Administration (SBA), which will fully guarantee loans provided by approved lenders to eligible entities. Forgiveness of these loans is also available under certain circumstances and the SBA has announced that it will be providing guidance on loan forgiveness. Here is some additional information about the PPP:
Businesses and nonprofit organizations with no more than 500 employees are eligible for the PPP through June 30, 2020. Businesses must have been in operation, with employees, on February 15, 2020. There are special rules for determining the 500-employee limit (for example, for employers in the Hospitality and Food Service industries (NAICS code 72), the 500-employee limit may be determined based on the number of employees per physical location). Certain franchises may also qualify as separate businesses.
Maximum Loan Amount:
PPP loans will be provided in amounts approximately equivalent to ten weeks of payroll costs. Loan amounts are determined based on 250% of average monthly payroll costs, taking into consideration average wages paid during the applicable period (which will either be the one-year period prior to the loan or calendar year 2019, at your option), up to a limit of $10 million. There are alternate periods for seasonal employers and those not in business in the prior year.
In addition to wages, commissions, and other compensation, the calculation of payroll costs includes employer healthcare costs such as insurance premiums, employer state and local taxes paid on employee gross pay, and other specified costs. However, as provided by the CARES Act, this calculation excludes employee annual salary over $100,000 per employee.
- Payroll costs (as described above);
- Costs related to the continuation of group health care benefits during periods of paid sick, medical or family leave, and insurance premiums;
- Interest on mortgage obligations, incurred before February 15, 2020;
- Rent, under lease agreements in force before February 15, 2020; and
- Utilities, for which service began before February 15, 2020.
Up to 100 percent of the PPP loan is forgivable (to the extent that employers maintain specified employment and wage levels), and the loan amounts forgiven are excluded from taxable income for federal income tax purposes. The loan will be fully forgiven if the funds are used for payroll costs and the other Loan Uses described above (however, the SBA has announced that due to likely “high subscription,” at least 75 percent of the forgiven amount must have been used for payroll).
To determine the amount that will be forgiven, the average number of full-time equivalent employees per month during the 8-week period from the date of the loan will be compared to either the period from February 15, 2019 to June 30, 2019 or January through February of 2020, at the option of the borrower. An alternate calculation may apply for seasonal employers. A similar comparison will apply to wage levels.
Repayment of a corresponding part of the loan may be required if earnings of an employee is reduced by 25% or more during the 8-week period from the date of the loan compared to the most recent full quarter of employment before the date of the loan. In addition, reductions in the number of employees or compensation occurring between February 15 and April 26, 2020 will not be considered in reducing the loan forgiveness amount if reversed by June 30, 2020.
Lenders will be required to obtain specified documentation to demonstrate employment and wage levels through the period.
Note: As a result of changes in guidance from the government, we encourage clients that ran their payroll cost report before April 8, 2020, to re-run their report, and to do so as close in time as possible to submitting their application to their lending institution.
Applying for PPP Loans:
Employers can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. Employers should consult with your local lender as to whether it is participating in the program.
Some lenders began processing loan applications on April 3, 2020. If you wish to begin preparing your application, you should contact a participating lender, or you can obtain a sample form to see the information that will be requested by a lender.
Borrowers won’t be required to make a personal guarantee for the loan or to provide collateral, and don’t need to be unable to obtain credit elsewhere. Borrowers must make certain good-faith certifications, including, but not limited to, that the uncertainty of current economic conditions makes the loan request necessary to support the ongoing operations. Borrowers must also acknowledge that funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments.
Interplay with Economic Injury Disaster Loans (EIDL) Program:
An employer that applies for an EIDL (regardless of whether related to COVID-19) may also apply for a PPP loan, so long as both loans are not used for the same purpose or are otherwise duplicative. An employer can also refinance an EIDL made between January 31, 2020 and April 3, 2020 into a PPP loan by adding the amount of an EIDL to the sum of the payroll costs. However, any advance amount received under the EIDL Grant Program would be subtracted from the amount forgiven of the PPP loan.
- Loan proceeds may not be used to pay:
- Wages exceeding $100,000 per employee (prorated for the covered period)
- Employees who live outside the U.S.
- FFCRA paid sick or family leave wages for which credit is allowed
- Employers that receive PPP loan forgiveness are not permitted to defer employer Social Security taxes under Section 2302 of the CARES Act*.
- Employers that receive the Employee Retention Credit for Closures Due to COVID-19 are not eligible for the PPP.
HOW TO APPLY FOR PPP
Per the SBA, “The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.”
In order to apply for the Small Business Administration’s Paycheck Protection Program, you are required to complete an application and submit supporting documents. Download the needed documents by following this link: PPP Needed Documents.
The download will include two documents:
- • PPP Application Package – instructions, checklist & application
- • PPP Loan Calculator
The application checklist and PPP loan calculator documents should be filled out in their entirety and be submitted with supporting data including (but not limited to):
- • 2019 Payroll summary forms identifying payroll and employer contribution to retirement and insurance
- • IRS Tax documents can help us confirm tax identification
- • 2019 Headcount documentation (preferably from a payroll provider)
- • 2019 Insurance premium reporting showing employer contribution (invoices will suffice, if Payroll report has this, no need to send invoice)
- • 2019 Employer paid retirement funding showing employer contribution (administrator reporting preferred, if Payroll report has this, no need to send invoice)
- • NAICS Code
- • 2020 Proof of payroll payments (as of 2/15/2020)
Understanding and filling out the application may be daunting, so please visit our YouTube channel or folder with training decks for assistance!
Finally, once you have filled out your application and collected all of your supporting data, please upload the following three items to the provided portal:
1. PPP Applicant Checklist
2. SBA PPP Application
3. All supporting documentation (only those necessary to prove how the numbers were calculated)
**If you run into issues with uploading your documents, clear your cache and/or log out of your Microsoft products. This should fix the error.
Title all documents with a name, document, and date. As an example, “Hipereon – Calculator – 04.22.20.pdf”.
Please note that no documentation will be opened or reviewed if sent via email or other means.