Important Update on the Paycheck Protection Program Loan

in Home/News Posts 0

We all know and recognize that our Country is currently in crisis-mode, and the impact of this crisis is devastating, especially on small businesses.  In their effort to mitigate the collapse of our economy, the Congress passed the CARES Act and the President signed it into law on Friday, March 27, 2020.  This Act has many items, but there are some very specific programs designed to stop small businesses from failing:

  • The $10,000 SBA-administered emergency advance-loan (or grant), to be provided within three days of online application HERE 
  • The up-to-$2-million-dollar, SBA-administered economic injury disaster loan (EIDL) program to be provided to companies experiencing severe loss of revenues. This loan was to be provided by the SBA by filling out a loan application form which is not readily available or discernible from the SBA’s own Covid-19 website HERE but which might (?) use the same link as the emergency advance loan above; and
  • A private lender issued, US guaranteed loan of up to $10 million under the Paycheck Protection Provision (PPP), with loans made by private lending institutions beginning April 3, 2020.

Our Firm sent out an explanation earlier this week about the CARES Act, but just yesterday, the Treasury Department published a Fact Sheet and the SBA has also just issued additional guidance which we would like to summarize for you, with information which is CRITICAL to filing a successful application for the Paycheck Protection Loan.

For the full Fact Sheet issued by the US Treasury, please click HERE

When can I apply?

  • Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
  • Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
  • Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program.

Who can apply?

All businesses – including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – with 500 or fewer employees can apply. Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries.

What do I need to apply?

You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to an approved lender that is available to process your application by June 30, 2020. Click HERE for the application

What can I use these loans for?

You should use the proceeds from these loans on your:

  • Payroll costs, including benefits;
  • 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.

What counts as payroll costs?

Payroll costs include:

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
  • Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
  • State and local taxes assessed on compensation;
  • DO NOT INCLUDE payments paid to 1099 independent contractors since they also qualify to apply for the PPP loan
  • For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

How much of my loan will be forgiven?

You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. You will also owe money if you do not maintain your staff and payroll.

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

How can I request loan forgiveness?

You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest,

In addition to the Paycheck Protection Program, each of our partners has been flooded with questions about filing unemployment claims. There is much confusion regarding sole proprietors who normally would not qualify for unemployment benefits, but under the CARES Act, these sole proprietors can apply and receive benefits. This new program is called “PANDEMIC UNEMPLOYMENT ASSISTANCE.”   Self-employed business proprietors can apply for benefits HERE.

All of us at Fineman West are working very hard to keep up with all of the newly enacted rules and guidance as it is announced and we will continue to keep you updated.  As always, please contact your relationship partner if you have any questions.

In Other News