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COVID-19
UPDATE #3 FOR BUSINESS OWNERS
Payroll Protection Program Loan
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 information below is based on the bill that was passed by the senate. CLICK HERE for full text. The final bill passed by the Senate is not available at this time.
Here are the highlights and details regarding the $2 Trillion stimulus bill and how it will help business owners.
There are four main programs available for businesses and here are the details regarding the Paycheck Protection Program (PPP) Loans:
***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.
This program provides 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
- 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.
- 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 use of loan proceeds?
- Payroll costs as per above
- Costs related to the continuation of group health care benefits during periods of sick, medical or family leave and insurance premiums
- Employee salaries, commissions or similar compensations
- Payment of interest on any mortgage obligation ( which shall not include any prepayment or payment of principal on a mortgage)
- Rent (under existing lease agreement)
- Utilities
- Payments on debt obligation that was incurred prior to the covered period
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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:
Payroll costs incurred during the covered period from March 1, 2020 through June 30, 2020 (excluding employee compensation over $100,000 per employee). In addition to payroll expenses, payments on existing debt during covered period.
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
Average number of full-time equivalent employees per month employed during the period March 1, 2019 through June 30, 2019.
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.
What is the deadline to apply for the PPP Loan?
June 30, 2020
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
- 6 months of business bank statements
- 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.
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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Office: 561.659.1177
Fax: 561.659.1197
1760 N. Jog Road, Suite 150, West Palm Beach, FL 33411
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