Monday Morning COVID-19
UPDATE #4 (REVISED)
FOR BUSINESS OWNERS
PPP Loan Updated Information
Is it right for your business?
To Our Valued Clients:
The Coronavirus Aid, Relief and Economic Security Act (CARES) was passed by the House and signed by President Trump on Friday, March 28th. The final bill was released this morning CLICK HERE for full text.
The changes
made in the final bill are underlined for easy reference.
***PLEASE NOTE***The SBA application for this loan
has not been finalized yet. We have relationships with lenders that we can recommend for our clients but they are not able to submit your application yet.
***Our office has been inundated with requests from clients to assist with the PPP Loan application and we have contacted our SBA lender partners for guidance on how business owners should apply. Please note, the following items to consider when evaluating your options:
1. Due to the volume of applications that will be submitted and the new underwriting guidelines that are still being determined, we do not expect this to be an immediate solution for your business cash flow
2. Depending on what your total maximum loan amount that you are eligible for based on the formula below, the PPP loan option may not be the best available for your business. In addition, the amount forgiven is subject to limitations especially in the event that you have less employees now than you did last year.
There are alternative loan programs available and we will be sending a summary of those options this afternoon.
The purpose of this program is to provide cash flow
to retain employees and help business owners to pay payroll, rent, utilities and monthly debt obligations.
What type of business are eligible?
- Business start date prior to February 15, 2020
For profit and 501(c)3 organizations with fewer than 500 employees
- Had employees for whom the borrower paid salaries and payroll taxes, or paid independent contractors as reported on Form 1099-Misc
- Individuals who operate a sole proprietorship as an independent contractor and eligible self-employed individuals
How is loan amount determined?
- If you were in business February 15, 2019-June 30, 2019, your max loan is equal to 250% of your average monthly payroll costs during that time period. If your business employs seasonal workers, you can opt to choose March 1, 2019 as your time period start date.
So, for example, if your average monthly payroll is $10,000 your total payroll costs from 2/15/19-6/30/19 would be $45,000 for the 4.5 months, the maximum loan amount would be $25,000.
- If you were not in business between February 15, 2019 - June 30, 2019, your max loan is equal to 250% of your average monthly payroll costs between January 1, 2020 and February 29, 2020
- If you took out an Economic Injury Disaster Loan (EIDL) between February 15, 2020 and June 30, 2020 and you want to refinance that loan into a PPP loan, you would add the outstanding balance to the payroll costs.
What costs are eligible for payroll costs to determine loan amount?
- Payment for vacation, parental, family, medical or sick leave
- Allowance for dismissal or separation
- Payment required for the provision of group health benefits including insurance premiums
- Payment of retirement benefits
- Payment of state or local tax assessed on the compensation of employees
- Compensation (salary, wage, commission or similar compensation, payment of cash tip or equivalent
What costs are not eligible?
- Qualified sick and family leave for which a credit is allowed under section 7001 and 7003 of the Families First Coronavirus Response Act
- Employee/owner compensation over $100,000
What are allowable uses of loan proceeds?
What are the loan terms, interest rate and fees?
The maximum term is 10 years, the maximum interest rate is 4%, zero SBA loan fees and zero prepayment penalty.
The lenders fee will be 5% for loans under $350,000, 3% for loans between $350,000 to $2,000,000 and 1% over $2,000,000.
How is the amount of debt forgiveness calculated?
Forgiveness is equal to the sum of the following during the 8 week period following the loan origination date:
Payroll costs (excluding employee compensation over $100,000 per employee)
Interest on the payments on covered mortgage obligations existing debt prior to February 15, 2020
Payments on covered rent obligations for leases in existence before February 15, 2020
Utility payments for which service began prior to February 15, 2020
Reduction in Debt Forgiveness:
The debt forgiveness is subject to a reduction based on number of employees as follows:
Average number of full-time equivalent employees per month employed during covered period
Either of the following, at the borrower's discretion:
Average number of full-time equivalent employees per month employed during the period February 15, 2019 through June 30, 2019, or
Average number of full-time employees per month employed by the recipient during the period beginning on January 1, 2020 and ending February 29, 2020
For example, if you have reduced your staff to 5 employees during the 8 weeks following loan disbursement date, and you had 10 employees during the period February 15, 2019 through June 30, 2019 or January 1,2020 through February 29, 2020 then 50% of the loan would be eligible for forgiveness.
How do I get forgiveness on my PPP loan?
You will need to apply through your SBA lender for forgiveness on your loan. In the application you will need to submit documentation verifying the number of employees on payroll, pay rates, including IRS payroll tax filings and state payroll and unemployment filings for the period March 1, 2020 through June 30, 2020. You will also need to verify payments on debt.
PLEASE NOTE
: A borrower could consider creating a separate bank account to track the uses of loan proceeds to make it easier to provide this certification
What happens after the forgiveness period?
Any loan amounts not forgiven at the end of one year is carried forward with a max term of 10 years at 4% max interest. Principal and interest will be deferred for 6-12 months from the loan disbursement date.
Where can I get a PPP Loan?
All current SBA 7(a) lenders are eligible lenders for PPP. Please feel free to contact us if you have any questions or would like a recommendation to a local lender.
Is there any recourse?
These loans are non-recourse and the personal guarantee requirement has been waived except in the case that the loan proceeds were used for a purpose not specified above as eligible use of funds.
What is the deadline to apply for the PPP Loan?
June 30, 2020
What documents will I need in order to apply?
The final list of required documentation has not been released yet, however you can start to gather the following to be prepared to apply as soon as the application is available:
- Signed 4506-T for each owner of a business with 20% ownership CLICK HERE
- Complete copy with all schedules of the business and personal tax return for 2019, or if 2019 not filed, 2018 with copy of extension
- Personal Financial Statement for each owner of a business with 20% ownership CLICK HERE
- Payroll summary for the period February 15, 2019 through June 30, 2019 or if you were not in business, January 1, 2020 through February 29, 2020.
- 2019 Form 1099s for independent contractors
- Documentation showing total of all health insurance premiums paid by the company owner under a group health plan
- Documentation showing sum of all retirement plan funding that was paid by the company owners
- 2019 Form 940, 941 or 944 payroll tax reports
- Payroll reports for a 12 month period ending on your most recent payroll date which shows gross payroll, PTO, and vacation pay
We will be sending details on the other loan options available shortly. Please contact us if you have any questions or if we can be of any assistance at this time. Thank you for your continued business and support.
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