Update related to Paychecks Protection Program Loans
Mitchell & Nemitz, PA
April 4, 2020
We hope that everyone is continuing to stay safe and healthy. Have confidence that we will make it through all of this. We wanted to give you an update on a few things related to the Paychecks Protection Program (PPP) Loans. If you need any assistance with preparing your information for the PPP loan application or questions about the PPP loan application, please let us know.
- The SBA posted a new PPP Borrower application on its website yesterday. Here is the link to the new application. If you filled out the previous application, which was preliminary, you will need to fill out this new one prior to submitting to your lender. https://www.sba.gov/document/sba-form--paycheck-protection-program-borrower-application-form
- The PPP Application process was slated to start yesterday, April 3rd, 2020. However, banks were working to clarify information and processes needed with the SBA and the Treasury department. The likelihood is you will be receiving something from your bank over the weekend with information related to applying and when they will be ready to accept applications. Our anticipation will be the date will be this Monday, April 6th, 2020, if not over the weekend.
- You will need to touch base with your bank about submitting a PPP loan application, if you have not done so already. From what we have heard, the PPP loan funds will be direct deposited into your bank account, therefore, your bank needs to be the institution that processes your loan application.
- The SBA gave a better definition of what is included in payroll costs. This is basically gross compensation, state and local taxes (for NC this is NC Unemployment), employer paid group health insurance, and employer paid retirement contributions. You will add up these total costs, take the monthly average, and put that amount on your PPP application that will then be multiplied by 2.5.
- The SBA issued guidance that independent contractors/1099 contractors are not included in your payroll cost calculations. This is because independent contractors and self-employed individuals are able to file for a PPP loan on their own. Based on information from the SBA, independent contractors and self-employed individuals can start submitting their PPP applications on April 10th. Everyone else was April 3rd or whenever your bank is ready.
- From what we have seen, the information lenders are requiring for backup are payroll summaries (that include a breakdown per employee), 941 forms, 940 form, W-3 form. Your bank may also request additional information for your employer paid group health and your employer paid retirement. Please contact your bank representative or visit their website to see what information your lender will be requiring.
- There have been questions as to what period to use to determine your average monthly payroll for the PPP Application. The PPP Application states, “For purposes of calculating ‘Average Monthly Payroll,’ most Applicants will use the average monthly payroll for 2019.”. This would lead us to believe this would mean calendar year 2019. However, the actual stimulus bill states it is for the prior year, which has led some to interpret that as 4/1/19 to 3/31/20 as a trailing 12-months average. From what we have seen and heard, most banks are accepting either using calendar year 2019 or the 4/1/19 to 3/31/20 period as long as you have the documentation to backup your average monthly payroll calculations. However, if there is any question on this, we suggest you contact your bank to see if they have a preference, as your bank has the final decision on approving and submitting your application.
- If you do not qualify for a PPP loan or if your loan amount with the PPP program is low, you may want to consider applying for an EIDL loan through the SBA website that also qualifies you for a $10,000 grant that does not have to be repaid. The $10,000 grant was mandated under the CARES Act and is intended to be deposited in your bank account within three (3) days. Please refer back to our previous emails related to the CARES Act provisions to see details about this program.