Following the enactment of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), small businesses and their advisors have been anxiously awaiting additional guidance from the U.S. Treasury Department (Treasury) regarding the Paycheck Protection Program (PPP). -- On March 31, 2020, Treasury issued its guidance.
Where Can I Find the Treasury's Guidance?
A copy of the Treasury's information sheet can be found here.
Does the Guidance Differ from the Information Provided in our earlier Alert?
No, but the guidance expands upon this information. Our CARES Act lert is located here. Importantly, the Treasury has announced that:
1. Participating lenders will begin taking applications from small businesses and sole proprietorships on April 3, 2020, and from independent contractors and self-employed individuals beginning on April 10, 2020.
2. Due to the likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
3. The interest rate on PPP loans will be fixed at 0.5% for a 2-year term.
4. Interested borrowers should apply as soon as possible as the funding for PPP is capped.
Is There Anything I Should Do Before I Apply?
Yes, gather all your information regarding your payroll expenses for 2019, as well as your mortgage/lease obligations. Remember, for purposes of calculating payroll expenses you can include:
1. salary, wages, commissions, or tips;
2. 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;
3. state and local taxes assessed on compensation; and
4. for a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment.
NOTE: Payroll expenses are capped at $100,000 on an annualized basis for each employee (i.e., any amounts above $100,000 should be excluded for purposes of calculating payroll expenses.)If you have a pre-existing relationship with a bank, contact them to find out if they participate in the PPP.
Is Forgiveness of the Loan Guaranteed?
No, after receiving the loan, you can submit a request to your loan servicer, who has 60 days to make a decision.
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 eight weeks after getting the loan. Additionally, if you do not maintain your staff and payroll, some or all of your loan may not be eligible for forgiveness.
Is the PPP Application Difficult?
No, the PPP application is only two pages. The Treasury has a fillable application form available here, but contact your lender for its application.
