The PAYCHECK PROTECTION PROGRAM (PPP) is one of the most relevant Stimulus Packages and you will have to discuss with your bank/financial institution as they are administering this SBA program.

This program would be 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.

What will lenders be LOOKING FOR?  Lenders will consider if you had employees or paid independent contractors

Lenders will also ask you for a good faith certification that:

  1. The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations
  2. The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments
  3. Borrower does not have an application pending for a loan duplicative of the purpose and amounts applied for here
  4. From Feb. 15, 2020 to Dec. 31, 2020, the borrower has not received a loan duplicative of the purpose and amounts applied for here. If you are an independent contractor, sole proprietor, or self-employed individual, lenders will also be looking for certain documents (final requirements will be announced by the government) such as payroll tax filings, Forms 1099-MISC, and income and expenses from the sole proprietorship.

How much can I BORROW? Loans can be up to 2.5 x the borrower’s average monthly payroll costs, not to exceed $10 million

  • 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. If your business employs seasonal workers, you can opt to choose March 1, 2019 as your time period start date.
  • If you were not in business between February 15, 2019 – June 30, 2019: Your max loan is equal to 250 percent of your average monthly payroll costs between January 1, 2020 and February 29, 2020.

Included Payroll Cost

For Employers: The sum of payments of any compensation with respect to employees that is a:

  • 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

For Sole Proprietors, Independent Contractors, and Self-Employed Individuals: The sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in one year, as pro-rated for the covered period.

EXCLUDED Payroll Cost:

  1. Compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the period February 15, to June 30, 2020
  2. Payroll taxes, railroad retirement taxes, and income taxes

Will this loan be FORGIVEN? Borrowers are eligible to have their loans forgiven

How Much? A borrower is eligible for loan forgiveness equal to the amount the borrower spent on the following items during the

8-week period beginning on the date of the origination of the loan:

  • Payroll costs (using the same definition of payroll costs used to determine loan eligibility)
  • Interest on the mortgage obligation incurred in the ordinary course of business
  • Rent on a leasing agreement
  • Payments on utilities (electricity, gas, water, transportation, telephone, or internet)
  • For borrowers with tipped employees, additional wages paid to those employees The loan forgiveness cannot exceed the principal.

How could the forgiveness be reduced? The amount of loan forgiveness calculated above is reduced if, there is a reduction in the number of employees or,  a reduction of greater than 25% in wages paid to employees.

What if I bring back employees or restore wages?

Reductions in employment or wages that occur during the period beginning on February 15, 2020, and ending 30 days after enactment of the CARES Act, (as compared to February 15, 2020) shall not reduce the amount of loan forgiveness IF by June 30, 2020 the borrower eliminates the reduction in employees or reduction in wages.

Documentation Needed to Submit:

  • Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance 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 program’s guidelines for use.

The U.S. Chamber of Commerce has prepared a great guide and checklist about this topic – COVID-19 Emergency Loans – Guide & Checklist