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An Overview of the Paycheck Protection Program Loan

UPDATED AS OF APRIL 2, 2020 - 1:19PM

There’s been some changes/clarifications posted by the Treasury.gov since we last posted this message- changes with loan terms (10 years to 2 years) and interest rate (now .5%) . Also, some clarificatinos regarding Payroll costs, see below the full latest detail. For the most up to date information, visit https://home.treasury.gov/

Lenders should begin accepting Paycheck Protection Program Loan applications beginning this Friday, April 3rd

Please speak with your lender right away to understand the information they will request from you and their application process. 

The treasury fact sheet specified the following as it applies to payroll costs: 

    • What counts as payroll costs?
      • wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.
      • 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;
      • For a sole proprietor or independent contractor:

More general information is below—including a link to the sample PPP application. Please note the below is based on the fact sheets and information provided by Treasury.gov as of 3/31/2020- may be subject to change

  • Loan Eligible to be Fully Forgiven
    • Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgage interest, rent, and utilities (at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
    • Any loan portion not forgiven converts to a 2 year loan with a 1% interest rate
    • What is the Maximum Loan Amount
      • 2.5 times the average monthly payroll costs for the prior year period (2019)
         
        • As per the instructions:
          • For purposes of calculating “Average Monthly Payroll”, most Applicants will use the average monthly payroll for 2019, excluding costs over $100,000 on an annualized basis for each employee.
          • For seasonal businesses, the Applicant may elect to instead use average monthly payroll for the time period between February 15, 2019 and June 30, 2019, excluding costs over $100,000 on an annualized basis for each employee. For new businesses, average monthly payroll may be calculated using the time period from January 1, 2020 to February 29, 2020, excluding costs over $100,000 on an annualized basis for each employee.
        • What counts as payroll costs?
          • 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;
          • 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.
  • Must Keep Employees on the Payroll—or Rehire Quickly
    • 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.
    • Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
  • All Small Businesses Eligible
    • Small businesses with 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors— are eligible. Businesses with more than 500 employees are eligible in certain industries. (restaurants, etc)
  • When to Apply
    • Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. Businesses are encouraged to apply as quickly as possible because there is a funding cap. The program is open until June 30, 2020.
  • 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.
  • How to Apply
    • You can apply through any existing SBA 7(a) 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. You should consult with your local lender as to whether it is participating. All loans will have the same terms regardless of lender or borrower. A list of participating lenders as well as additional information and full terms can be found at www.sba.gov.
  • What do I need to certify?
  • As part of your application, you need to certify in good faith that:

    • Current economic uncertainty makes the loan necessary to support your ongoing operations.
    • The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments.
    • You have not and will not receive another loan under this program.
    • You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting this loan.
    • Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
    • All the information you provided in your application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law.
    • You acknowledge that the lender will calculate the eligible loan amount using the tax documents you submitted. You affirm that the tax documents are identical to those you submitted to the IRS. And you also understand, acknowledge, and agree that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews

A sample of the application can be found here:

https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf

Monday, April 6, we will provide information about the Economic Injury Disaster Loan. That application can be processed online https://covid19relief.sba.gov/#/