eAlert: Paycheck Protection Program (PPP)

sba loan paycheck protection program ppp

Signed into law on March 27, the Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn through the Paycheck Protection Program (PPP).

Updated April 23, 2020

As of today, the House has approved a $484 billion package to prop up the U.S. economy and provide aid to the health care system. The Senate passed the bill by unanimous consent on Tuesday. It’s now expected to head to President Trump, who has said he will sign it.

Updated April 21, 2020

As of April 16, the initial amount of relief loan funding under the Paycheck Protection Program is exhausted and the SBA cannot approve new loans. Congress is currently negotiating legislation that would provide additional funding.

On Tuesday, April 21, 2020, the Senate approved a bill approving over $480 billion in additional coronavirus relief (including $310 billion for the PPP), and the House could approve the bill as early as Thursday. We are monitoring the situation and will have updates as soon as they are available.

Updated April 7, 2020

In order to help clients apply for loans under the Paycheck Protection Program (PPP), we are introducing a new report to assist in data gathering.

We created this report to assist you with your application based on the most recent guidance available. Please keep in mind that your lender will ultimately determine and approve the final calculation for your average monthly payroll cost.

To get your PPP Loan Analysis Report, please follow the steps below. Then, you can use our PPP Loan Report Explainer to understand how these calculations were made.

Paycheck Protection Program (PPP) Overview

The Federal Paycheck Protection Program provides eight weeks of cash-flow assistance to small businesses through 100% federally guaranteed loans to employers who maintain their payroll during this emergency.

If employers maintain their payroll, the loans would largely be forgiven, which would help workers to remain employed. Additionally, it would help affected small businesses and our economy to quickly snap-back after the crisis.

Ultimately, the Paycheck Protection Program is designed to cover payroll costs, paid sick leave, supply chain disruptions, employee salaries, health insurance premiums, mortgage payments, and other debt obligations to provide immediate access to capital for small businesses who have been impacted by COVID-19.

Who is eligible:

Small businesses with 500 or fewer employees (including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors). Businesses with more than 500 employees are eligible in certain industries.

When to apply:

Starting April 3, 2020, small businesses and sole proprietorships can apply. Independent contractors and self-employed individuals will be able to begin applying on April 10, 2020. We encourage you to apply as quickly as possible as there is a funding cap.

A payroll report is required to show your average monthly payroll from 2019. (Your current payroll system should be able to provide this report.)

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 they will be 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. Additionally, we have a list of local institutions who are participating in the loan program if you would like this.

Fully funded:

Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, 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, and neither the government nor lenders will charge small businesses any fees.

PPP Highlights

  • Small employers with 500 employees or fewer (per entity) are eligible, subject to SBA affiliation standards with some CARES specific exceptions.
  • Businesses will self-certify that the loan is necessary for operations due to the economic uncertainty caused by the COVID-19 crisis.
  • No personal guarantees, collateral, personal resource test, or credit elsewhere test.
  • If the employer has already laid off more than 25% of their employees, they may need to hire some or all of them back to be eligible for loan forgiveness.
  • Certain non-profits are eligible.
  • Loan/Grant amount will be 2.5x of a business’ average monthly payroll, rent, interest expense and utility payments based on TTM subject to a $10 million maximum loan amount.

Top Tip: Employers should prepare to verify this amount using their last four quarterly IRS 941 filings or equivalent.

Loan Forgiveness

In addition to the highlights above, certain borrowers will qualify for loan forgiveness equal to the amount spent during an eight-week period after the origination date of the loan on:

  • Payroll costs
  • Interest payment on any mortgage incurred before Feb. 15, 2020
  • Rent on any lease in force before Feb. 15, 2020
  • Utilities for which service began before Feb. 15, 2020

Further, the amount forgiven would be reduced in proportion to any reduction in employees retained compared to the prior year and to the reduction in pay of any employee beyond 25% of prior year compensation.

Employers would be able to apply for loans immediately through more than 800 existing SBA-certified lenders, including banks, credit unions, and other financial institutions. Additionally, SBA is responsible for streamlining the process to bring additional lenders into the program if needed.

More Resources

The administration will release more details soon, including the list of lenders offering loans under the program. In the meantime, the U.S. Chamber of Commerce has issued this guide to help small businesses and self-employed individuals prepare to file for a loan.

We’ve also gathered together the resources below for your reference and will continue to update this page as we learn more.

Future Updates

We know that the weeks to come will bring unexpected challenges for the business community as a whole due to the Coronavirus. However, we are prepared to respond to these challenges as they arise. Additionally, we will continue to provide ongoing communications as more details unfold.

Finally, if you have any questions or concerns, please feel free to contact us at (866) 946.2032 or by emailing our support team. And don’t forget to follow us out on FacebookTwitter, and LinkedIn for even more Coronavirus and business updates!

Photo by Alexander Mils from Pexels

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