Everything You Need to Know About 2020 Paycheck Protection Program
Paycheck Protection Program
Who is eligible for a Paycheck Protection Program Loan?
Business was in operation on 2/15/2020.
Business had employees for whom the borrower paid salaries and payroll taxes OR paid independent contractors as reported on a form 1099-MISC.
Had less than 500 employees (full-time, part-time, or other basis). Hospitality and Food Industry (restaurants, hotels, etc.) can be measured per physical location.
Individuals operating as a sole proprietorship or as an independent contractor.
PPP Loan Application can be completed online at https://covid19relief.sba.gov/ or a paper form with almost any FDIC bank or FICU credit union (Some banks are saying apply online). The application will ask for:
Owners names, addresses, and TINs.
Good faith certification: i. The loan is needed due to the uncertainty of current economic conditions. ii. Acknowledge that the funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments. iii. That the eligible recipient does not have an application pending and has not received amounts for the same purpose and duplicative of amounts applied for or received under a covered loan.
The loan is non recourse against any individual, shareholder, member, or partner UNLESS the funds are used for purposes not authorized.
No personal guarantee is required.
No fees will be collected from the applicant.
Agents (lawyer, accountant, consultant, loan broker, etc.) will submit a fee disclosure form and receive payment from the bank.
The amount of the loan can be average monthly payroll for the previous one-year period (or 1/1/2020-2/29/2020 if a new business) times 2.5 months. Payroll costs includes:
Salary, wages, commission, or similar compensation,
Cash tips or equivalent,
Vacation, family leave, medical leave,
Allowance for dismissal or separation,
Group health benefits including insurance premiums,
State and local taxes (unemployment taxes),
For a sole proprietor or independent contractor, the sum of payments of any compensation to or income that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount not more than $100,000 per year as prorated for the covered period.
No compensation of an individual in excess of an annual salary of $100,000 shall be included.
No social security and Medicare taxes, railroad retirement or income tax at the source shall be considered.
No compensation for employee whose principal place of residence is outside the United States shall be considered.
Qualifying expenses paid during the 8 weeks following the date of the loan will be forgiven. Qualifying expenses include:
Payroll costs including salaries and wages including vacation and sick pay,and health benefits paid by employer.
Mortgage interest for loans obtained before 2/15/2020 and interest on any other debt obligation incurred before 2/15/2020.
Rent for leases obtained before 2/15/2020.
Utilities for accounts established before 2/15/2020.
Forgiveness will not be taxable income.
Other conditions for loan forgiveness: i. Maintain the same number of full-time employees as the previous year average. ii. Total payroll must not decrease by more than 25%. If it does, then the amount of forgiveness will be decreased. iii. If employees were laid off, suffered reduced pay rates, or reduced hours, you will not be penalized if they are rehired before 6/30/2020 or when the loan is approved. iv. Keep extremely detailed records of expenses used to obtain loan forgiveness.
Other PPP Loan Provisions
Repayment of unused amounts will be deferred for 6-12 months. SBA will extend guarantee for 2 years. Interest rate is up to 4%.
Only one PPP loan can be received.
Maximum loan is $10,000,000.
Total amount of loan $349,000,000,000. When funds are depleted, the program will end.