PAYCHECK PROTECTION PROGRAM
The economic impact of the COVID-19 pandemic on small businesses is unprecedented. As you look to secure the future of your business, there are opportunities for help through the US Small Business Administration (SBA) loans.
One of the most impactful is the Paycheck Protection Program (PPP), designed to provide quick access to cash that can help you keep paying your employees and assist with other expenses such as health insurance premiums, rent or mortgage payments and utilities.
We are here to help you navigate this new and unprecedented assistance program:
- Loans through the PPP are available through June 30, 2020. They are 100% federally guaranteed, meaning no personal guarantees or collateral are The loan may be forgiven if your business maintains payrolls during the crisis.
- If the full amount of the loan is not eligible for forgiveness, any remaining amount will remain a loan with a maximum term of two years at 1% interest and zero loan fees. Loan payments can be deferred six
- In addition to small business employers, this program is available to sole proprietors, independent contractors and self-employed
If you are interested in this funding source, apply as quickly as possible, as there is a funding cap on the program.
Are You Eligible?
Here is a summary of eligibility requirements:
- Small businesses with no more than 500
- Individual who is a sole proprietor, an independent contractor or self-employed.
- Restaurant or a hotel that has no more than 500 employees at each
- Independently owned franchises with fewer than 500
- 501(c)(3) charitable organization with not more than 500
How Much Can You Borrow?
Loans can be up to 2.5 times your average monthly payroll costs, up to a maximum loan amount of $10 million. Payroll costs include the following:
- Salaries, wages or other compensation paid to an employee sole proprietor, or independent contractor (up to $100,000 annual limit per worker).
- Vacation, parental, family, medical or sick
- Allowance for separation or
- Payment for employee benefits consisting of group health coverage, including insurance premiums and retirement
Note: As mentioned there are limitations for employees who earn over $100,000 or who live outside the US. We can help you calculate the amount of eligible payroll costs.
How Can You Use Loan Proceeds?
Your business can use the loan proceeds to fund these costs incurred between February 15 and June 30, 2020:
- Payroll costs for your employees, whether they are able to work or
Note: For example, your business may be unable to open due to government restrictions. But if you continue to pay your workers, those costs are included in the eligible payroll costs. This can include paying sick, medical or family leave compensation.
- Group health care benefits including insurance
- Mortgage interest, rent and
- Other debt interest payments (incurred before February 15, 2020).
- Refinancing an SBA Economic Injury Disaster Loan (EIDL) made between January 31 and April 3,
Can the Loan Be Forgiven?
Yes! Any amount forgiven is also not considered taxable income, and you can still take the deduction for the costs you incurred on your tax return.
The goal of this program is to keep employees paid during the eight weeks beginning with the date of your loan. Any reduction in the number of employees or the wages you paid affects the forgiveness of the loan. The amount forgiven is the amount spent on the costs incurred as outlined in the previous section “How Can You Use Loan Proceeds?” There are a few things to keep in mind:
- If there is any reduction in the number of full-time employees or a decrease in wages paid by more than 25%, the loan forgiveness is
- An additional limitation requires that no more than 25% of the loan forgiveness amount may be attributable to non-payroll costs. For example, if you take a PPP loan of $1,000,000, only $250,000 of the loan used for rent, utilities, mortgage and other debt interest payments can be
What Should You Do When You Successfully Secure the Loan?
We highly suggest you open a separate bank account to hold the proceeds of the loan. This makes for easy tracking.
To request the loan forgiveness, you are required to submit a request to the lender that is servicing the loan. The request must include documentation on payroll and other expenses. We can provide a calculation worksheet to help with this. Final guidance is still needed to clarify details, so we will share that when it’s available.
Have You Already Laid Off Employees or Cut Pay?
The loan amount can still be forgiven for the full amount of your payroll cost if you rehire your employees by June 30, 2020, and restore your FTEs and wage levels for any changes made between February 15 and April 26, 2020.
How Can You Apply for a PPP Loan?
All current SBA 7(a) lenders are eligible lenders for PPP. More lenders are expected to be in place soon. You can check with your current bank or lender to see if they are an SBA lender. You can also contact us for guidance.
What Do You Need for the Loan Application Process?
You will be asked to verify the number of employees and payroll incurred over the most recent 12 months with payroll processor records or payroll tax filings.
You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to the bank of your choice. You will also be required to make certifications. You may access the Paycheck Protection Program loan application here.
In keeping with our mission to provide financial peace of mind, please reach out to us for any assistance you may need with the application process.
What About the Emergency Economic Injury Disaster Loan (EIDL) ?
You can apply for both the Economic Injury Disaster Loan (EIDL) and PPP. All of the US has been declared a disaster area. Small business owners in all states and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000.
Like the PPP, this program for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by the COVID-19 pandemic.
Funds will be made available within three days of a successful application. This loan advance will not have to be repaid.
If you take advantage of an emergency EIDL grant of up to $10,000, that amount will be refinanced into the PPP loan. For example, if you apply for a PPP loan of
$1,000,000 and you also applied and received an emergency EIDL advance of
$10,000, the maximum loan proceeds you will get from the PPP is $990,000. The amount of emergency EIDL advance secured is also subtracted from the amount forgiven under PPP.
You need to apply for the EIDL directly with the SBA. You may access the Economic Injury Disaster Loan application here.
Are There Other COVID-19 Disaster Programs Available?
Yes. We are available to discuss these options with you.