April 3, 2020
Recap of the Payroll Protection Program
PPP is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
Paycheck protection loans will be granted through banks.
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 it is participating in the program. Lenders may begin processing loan applications on April 3, 2020.
This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors, and self-employed persons), private non-profit organization, or 501(c)(19) veterans organizations affected by coronavirus/COVID-19. Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
Small businesses, sole proprietorships, nonprofits and veterans organizations can begin applying for PPP loans beginning April 3. Independent contractors and the self-employed can start applying April 10. PPP loans will be available through June 30, 2020.
Small businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. This means each store location could be eligible.
Businesses will be required to begin repaying the loan in six months unless part or all of it is forgiven. Up to the full amount of the loan can be forgiven if you can document that the money was used to maintain your employment at 2019 levels, and you did not significantly reduce employees’ pay.
The SBA is anticipating that no more than 25% of the forgiven amount may be for non-payroll costs, and that the payroll portion of forgiveness could be reduced if you decrease your full-time employee headcount and/or decrease salaries and wages by more than 25% for any employee who made less than $100,000 annualized in 2019.
If you have already let people go, you have until June 30 to restore your full-time employment and salary levels for any changes made between February 15 and April 26, 2020, to qualify for loan forgiveness.
We will share more details as they become available. Please visit our
COVID-19 Resource Page
for more updates.
Feel free to contact any member of our team at (610) 828-1900 (PA) or (732) 341-3893 (NJ) with questions. Rich Higgins, CPA, managing principal – New Jersey office can be contacted at
Richard.Higgins@MCC-CPAs.com
. I can be reached at
Marty.McCarthy@MCC-CPAs.com
. As always, we are happy to help.
Stay safe,
Marty McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company
Source: Small Business Administration and U.S. Department of the Treasury.
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).
