Paycheck Protection Program (PPP) Loan Information

For the most part, I know that most eligible businesses have already applied for the PPP loan, but there are still available funds and if you haven't yet applied, please don't hesitate. Here are the particulars on the eligibility and loan specifications. Subscribe to our blog to make sure you know when our post is up related to the forgiveness aspect of the loan, but for now here's the application information.

Eligibility

Business eligible for loans through this program include:

1. Sole Proprietors, Independent Contractors, Self-Employed Individuals, Nonprofit organizations (501(c )(3)) , Veterans Organizations

2. In operation on February 15, 2020 and had employees who were paid salaries or paid independent contractors which was reported on 1099-MISC.

3. With less than 500 employees

4. Businesses with more than one physical location with less than 500 employees per location who are not: Civic and social organizations, amusement or recreation parks, theaters, other entertainment facilities

5. Must not have another SBA loan issued for the same purpose. If the applicant has an SBA loan (including the EIDL) issued since January 31, 2020 they are not eligible for the CARES Act loan unless: A. They are applying for the CARES loan to refinance the EIDL loan (or other SBA loan); B. The EIDL loan (or other SBA loan) was not issued for costs covered by the CARES loan (payroll costs, rent, utilities, etc.)

Loan Particulars

Loan proceeds can be used for certain payroll expenses including:

1. Salary, wages, commissions, tips

2. Vacation, family, medical, or sick leave

3. Allowance for dismissal or separation

4. Payments required for health care benefits, including insurance premiums

5. Retirement benefit payments

6. State and local taxes assessed on employee compensation

7. Compensation to a sole proprietor or independent contractor provided the amount is not more than $100,000 in 1 year (which is prorated for the period of February 15, 2020-June 30, 2020)

8. Rent

9. Payments of interest on any mortgage obligation (not principal)

10. The bill text says ‘any mortgage obligation’ and does not clarify if the mortgage must be held by the business, or if a home mortgage for a sole proprietor would count.

11. Utilities

Loan proceeds can not be used for:

1. Compensation of an individual employee in excess of an annual salary of $100,000

2. Meaning, the loans will only be issued based on employees being capped at $100,000. Additional wages paid by the company would not be subsidized by this loan

3. Compensation paid to contractors (the contractor is eligible to apply for their own loan, so a business cannot take a loan against the amount paid to the contractor)

4. Compensation of an employee who has a principal residence outside of the United States

5. Qualified Sick Leave or Qualified Family Leave eligible for a credit under the Families First Coronavirus Response Act, which is covered under the ‘Paid Sick Leave’ section of this page.

6. Employer portion of social security and medicare taxes

Loan Specifics

1. Maximum loan amount allowed is the lesser of 1. Average monthly payroll costs* incurred in 2019** by 2.5 or $10 million

2. There will be no Administrative fee paid by the borrower

3. Interest rate of 1%

4. Payments against principal, interest, and fees will be deferred for a minimum of 6 months and a maximum of 1 year.

5. There will be no prepayment penalty

6. Recipients will be eligible for forgiveness of indebtedness in an amount equal to costs incurred and payments made from February 15, 2020 to June 30, 2020 for costs listed under point ‘b’ above. See ‘forgiveness’ below

7. Maturity of 2 years from when loan forgiveness is applied

*Payroll costs in this instance include: Salary, Wages, commission, tips, vacation, family leave, sick leave, medical leave, dismissal/separation payments, expenses related to group health care including insurance premiums, retirement benefit payments, state or local taxes assessed on employee compensation. For sole proprietors & independent contractors, eligible loan amounts can be calculated based on their 2019 Schedule C Net Income amount, divided by 12 months and multiplied by 2.5.

**Average monthly payroll costs for 2019 should be calculated using all of 2019. if you're a seasonal employer, you can use February 15, 2019 - June 30, 2019. If you're a new company, you can opt to use the period of January 1, 2020 and February 29, 2020

Documentation Required

1. Make a good faith certification that the loan is necessary to support ongoing operations

2. Make a good faith certification that the funds will be used to retain workers and maintain payroll, or make mortgage/lease payments

3. Make a good faith certification that the applicant does not have a pending application for another Federal loan and has not already received a loan through this Act in 2020.

4. Copies of payroll tax filings

5. Self-employed individuals, independent contractors, or sole proprietorship will need to include copies of Form 1099-MISC and their 2019 Schedule C.

6. No personal guarantee is required and there will be no individual recourse provided the loan is used for approved expenses.

7. No collateral will be required

We have been involved in the application process for many clients, so if you find that you have questions throughout the process, feel free to reach out and ask them. We're happy to help.

Best of luck and we hope you are successful!