Paycheck Protection Program PPP Summary, Who Qualifies, and What Amount is Forgivable

[man_in_pain]

What is the Paycheck Protection Program (“PPP”)

- Establishes $350 Billion for the provision of loans to small business

- New type of SBA Section 7(a) loans

- For loans made between February 20, 2020 and June 30, 2020

- Only available to qualifying "small" employers

- Up to 100% of the loan amount is eligible for forgiveness

Who can apply for the Paycheck Protection Program (“PPP”)

-Anyone who meets the SBA's definition of a "small business concern"

-Has no more than 500 employees per location

-NAICS code begins with 72

What are the Requirements for the Paycheck Protection Program PPP

- In businesses before February 15, 2020

- Had employees or independent contractors

- Make a “good faith” certification of the following:

1. The uncertainty of current economic conditions makes the loan request

necessary to support ongoing operations

1. The borrower will use the loan proceeds to retain workers and maintain

payroll or make mortgage, lease, and utility payments

1. Borrower does not have an application pending for a loan duplicative of the

purpose and amounts applied for here, nor have they received a duplicative

loan since February 15. Note that previous SBA loans may be refinanced

using a PPP loan.

- Must apply by June 30, 2020

Paycheck Protection Loan Details

- Maximum loan amount is lesser of (a) 2.5 times the average monthly payroll (based on 12-month lookback) or (b) $10 million

- Loans will be 100% guaranteed by the SBA

- Availability of credit from other sources does not disqualify eligibility

- No application fees or closing costs

- Nonrecourse; no collateral or personal guarantees imposed

- Maximum interest rate is 4%

- Maximum loan term of 10 years

- First 6 months of payments (principal and interest) are automatically deferred;

deferral can extend up to a year

- Up to 100% of the PPP loan can be forgiven

What is the Maximum Loan From the Paycheck Protection Program

- 2.5 times average total monthly payments of “payroll costs” during the 1-year period

before date the loan is made. (exceptions apply)

What Payrolls Costs are Included in the Paycheck Protection Program

- Wages

- Tips

- Vacation and sick pay

- Group health benefits

- Severance

- Retirement benefits

- State and local taxes on employee compensation

How Does PPP Paycheck Protection Program Loan Forgiveness Work

- Forgiveness equal to amount of qualifying expenses incurred in the first 8-week

period after origination of the PPP loan.

- “Qualifying expenses” include:

Payroll costs (defined earlier)

Rent payments

Mortgage interest (no principal payments)

Utility payments (electricity, gas, water, transportation, telephone, or internet

access)

- Forgiven amounts are not taxable to the small business (i.e., a tax-free grant)

- Forgiven amounts are interest free

PPP Limits on Loan Forgiveness

- Loan forgiveness is reduced proportionately to the reduction in employee headcount during the COVID-19 crisis.

- Loan forgiveness is reduced dollar-for-dollar by decreases in an employee’s compensation greater than 25% from prior quarters

Here's a link with more details and how to apply

 

[613jono]

@man_in_pain Do you know if the PPP is a totally separate financing product from the economic injury disaster loan ( https://covid19relief.sba.gov/#/ )?

I've read " The actual amount of any Paycheck Protection Loan (subject to a $10 million cap) will be determined by a formula based on the business’s average monthly Payroll Costs (defined below) during the 12-month period before the loan is made (adjusted for seasonal employees) multiplied by 2.5, plus the amount of any EIDL Loan (defined below) made after January 31, 2020 that is refinanced with the Paycheck Protection Loan. For businesses formed between February 1 and June 30, 2019, there is an alternative formula. Notably, these calculations are made after excluding any compensation paid to any individual in excess of an annual salary of $100,000, as prorated for the covered period." ( https://www.wilmerhale.com/en/insig...ry-disaster-loan-programs-under-the-cares-act )

I ask because I can't find any actual application info for the PP on the SBA website.

I've just been assuming to take the disaster loan and that the PPP will either be a separate loan and you'll need to refinance like the quote above says or they'll just change the payment/forgiveness rules on the disaster loans issued after February.

If anyone is interested I am going to call my account manager at BOA tomorrow to see what they're hearing b/c the actual loans are administered by commercial banks and just insured by the SBA.

 

[lucylew]

@613jono I had the same questions reading the sba website this evening. Interested in what you find out

 

[dustie]

@man_in_pain

Who can apply for the Paycheck Protection Program (“PPP”)

-Anyone who meets the SBA's definition of a "small business concern"

-Has no more than 500 employees per location

-NAICS code begins with 72

This part is worded oddly. These are "or" qualifications not "and". For example, someone who has a NAICS code that doesn't start with 72 still qualifies, it's just that if your business is NAICS 72 but doesn't meet the other qualis it still qualifies.

 

[silentdecay]

@dustie Agree with you. Our NAICS definitely does not start with 72 and we are most certainly eligible.

 

[dustie]

@silentdecay For the unaware, 72 is representative of "Accommodation and Food Service" businesses. I'm not sure why they are specifically called out, since all restaurants and hotels surely have less than 500 employees per location and would qualify anyway.

 

[johnnys1983]

@man_in_pain Does anyone know if the business owner's W2 salary is also covered in the calculation?

 

[man_in_pain]

@johnnys1983 If you're an S-Corp for sure

 

[johnnys1983]

@man_in_pain Yes, LLC with S-Corp election. Ok thank you.

 

[magpie0603]

@man_in_pain Why only S-Corp?

 

[coulter123]

@man_in_pain Outdated info

 

[man_in_pain]

@coulter123 Which part?

 

[tammyinga]

@man_in_pain

- Maximum interest rate is 4%

- Maximum loan term of 10 years

This part. The Treasury Dept published the official guidelines yesterday and the interest rate is a fixed 0.5% and the term is 2 years.

 

[man_in_pain]

@tammyinga They do be changing things almost hourly

 

[damj]

@man_in_pain They do be.

 

[frcs]

@tammyinga Just changed to %1

 

[tammyinga]

@frcs Source?

 

[frcs]

@tammyinga Was watching Press conference... will find one in print.

 

[tammyinga]

@frcs What kind of press conference? Because what some random employee says doesn’t exactly trump the published guidelines by the Department of the Treasury.

 

[frcs]

@tammyinga Mnuchin during the White House briefing today. Said after feedback from SBA partners the .5% was too low for the smaller local entities. So they’re raising it to 1%. I imagine it’ll change again tomorrow. Haven’t been able to find documented info yet.