Know How Management Services

Unpacking the Paycheck Protection Program (PPP)

-Updated 4/24/2020-

President Trump signed legislation this afternoon infusing an additional $310-billion to the PPP loan fund that was previously exhausted 4/16/20. Like the first round of funds, these will likely go fast, so you'll want to apply quickly.  


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With the passing of the Coronavirus Aid, Relief and Economic Security (CARES) Act on March 27, 2020, a big win for small businesses is the $349-billion PPP, that provides cash-flow assistance in the form of *fully forgivable government-backed loans. 


Our goal is to spread awareness and better understanding of this program to folks, show that most are eligible, and how to apply quickly (now through Quickbooks, Square, and PayPal). Should you have any questions or need assistance, please drop us a line.  We’re happy to help.   

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*Fully Forgiven Loan

100% forgiveness qualifications are: 

  • Maintain Full-Time Equivalent (FTE) headcount for following 8 weeks (as compared to benchmark time windows of either a) 1/1/20 - 2/29/20 or b) 2/15/19 - 6/30/19) ~ *If FTE drops, forgiveness % is reduced accordingly (see "How Much" below)
  • Sustain wages for <$100k/yr employees at levels of at least 75% 
  • Restore employees and/or wages that were reduced between 2/15/20 - 4/26/20

Use loan funds as outlined (documentation required): 

  • At least 75% on eligible payroll and related costs ~ *If payroll totals for employees under $100k decrease by more than 25%, forgiveness % is reduced accordingly (see "How Much" below)
  • No more than 25% on mortgage/rent, utilities, or interest-only debit obligations originating prior to 2/15/20

Who Can Apply

Eligibility generously includes:

  • All small businesses under 500 employees, non-profits, veteran organizations, tribal business concerns, sole proprietors…
  • AND independent contractors, and self-employed individuals
  • As long as your entity started prior to 2/15/2020

Must certify in good faith that current economic uncertainty makes the loan necessary to support ongoing operations, such as sustain workers, payroll, mortgage/rent, and utility payments

  

While owners with ownership in other business will have to be detailed in an Addendum, it’s still unclear how that will impact eligibility across entities depending on unique circumstances 

How Much

Maximum loan of 2.5 x average monthly eligible payroll and related costs, up to $10M

  • Again, up to 100% forgivable if qualifications are adhered to (see "*Fully Forgiven Loan" above)
  • Eligible ‘payroll’ is capped at $100k/employee

Terms are 2 years @ 1.0% with no payments for 6 months (interest accrues) and no pre-payment penalties


No personal guarantee or collateral required, and a credit check is not required

When & Where

Program is open until 6/20/2020, or until funds are exhausted, and applications are scheduled to begin:

  • 4/3/2020 for small businesses, sole proprietors, and non-profits
  • 4/10/2020 for independent contractors and self-employed individuals 

Loans are originated and serviced through SBA-approved lenders, so we advise reaching out to your bank quickly to ensure they can access this program

  • The SBA and Treasury released an Interim Final Rule to lenders late-evening on 4/2/2020, hours before the go-live date, so hopefully banks will quickly implement the new regulations and activate their online application process
  • Due to high demand, most banks are currently limiting applications to existing customers

Thankfully, on 4/13/2020, the SBA approved some well known non-banks that many folks are already doing business with:

Prepare

While lenders will set their own list of supporting documents, here are suggested items to gather: 

  • List of authorized loan signer(s) for entity
  • Entity formation and filing documents, operating agreement, and state certificate of good standing
  • 2019 and YTD 2020 payroll details, including Forms 940 and 941
  • Employer-paid State payroll tax (not federal; not employee withholdings)
  • W-2s and/or 1099s
  • 2019-current group health insurance premium and retirement funding statements
  • 2019-current tax returns and/or complete financials (profit/loss and balance sheet) 

Additional information: