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PAYROLL PROTECTION PROGRAM – The time to act is NOW!

Paycheck Protection Program Application & Information

On Friday, March 27, 2020, the President signed the Cares Act into law.  As a part of the act, it included funding of $349 billion of partially forgivable small business loans.  Yesterday afternoon, March 31st, the treasury department posted a clear and concise guidance on the loans.  The following are excerpts from the published guidance from the US Treasury along with some additional suggestions. Here is a link to the complete listing https://home.treasury.gov/system/files/136/PPP–Fact-Sheet.pdf

Who Qualifies?  Employers with less than 500 employees (affiliation rules may apply) & who certify current economic uncertainty makes the loan necessary to support your ongoing operations. Certain industry size rules may apply if over 500 employees.

What’s needed to apply? Paycheck Protection Program loan application with the required documentation. Click HERE for the application.

When to Apply? Starting April 3 through June 30, 2020, but due to funds limitation as soon as possible.

Where to Apply?  Either your current existing bank if SBA qualified or a qualified SBA lender.  Due to the high volume of applications expected your current bank, if qualified, will probably be the best option.  If you need assistance in finding a solution, please call. 

How large can the loan be? Loans can be for up to 2 & ½ months of your average monthly payroll costs from the last year. That amount is subject to a $10 million cap.

What other documents will need to be included in the application? We suggest you provide a calculation of your average payroll costs including clear computations of the limitations discussed below.  You will need to provide your lender with payroll documentation.  This includes W-3’s, 941’s, Health Insurance Bills (without Employee Listing), First Page Unemployment Reports, and Canceled checks/retirement account reports documenting match/employer contribution.

What can the loan proceeds for?

Qualified uses include:

  • 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.

We are suggesting that our clients create an account to receive the funds.  When payroll and other qualified uses occur, transfer the funds from the account to your operating account. 

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; and
  • 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 the 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 the loan forgiveness will be processed? 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, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days.

Is the loan forgiveness taxable? No. The eligible forgiven balance will be excludable from your taxable gross income (CARES Act Section 1106(i)).

What is the interest rate? .50% fixed rate. (Per Department of Treasury Web Site) maximum of 4% (Per CARES Act). 

When do interest payments begin? All payments are deferred for 6 months; however, interest will continue to accrue over this period.

When is the loan due? In 2 years.

Can you pay the loan earlier than 2 years? Yes. There are no prepayment penalties or fees.

Is there any collateral for these loans? No. No collateral is required.

Is there any personal guarantee for this loan? No. There is no personal guarantee requirement.

What Key Items need to be certified? 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.
  • 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. ***If the proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against you.***