8050 N. Palm Ave, Suite 106
Fresno, CA 93711-5797


Payroll Protection Program

House, Senate approve 5-week PPP loan application extension

The U.S. Senate and House of Representatives have both unanimously agreed to extend the Paycheck Protection Program (PPP) by five weeks in an effort to continue providing relief for small businesses hit hard by the pandemic. Applications officially closed for the program on June 30 when the Senate voted for a last-minute extension. President Trump signed the bill on July 3.

This extension would give small businesses until Aug. 8 to apply for a share of the approximately $129 billion in remaining PPP funding through the Small Business Administration (SBA). Thanks to the PPP Flexibility Act passed on June 5, recipients have 24 weeks to use loan funds for payroll and other essential expenses like rent/mortgage and utilities. The Flexibility Act also lowered the threshold for payroll expenses to 60% to achieve full forgiveness with a few safe harbor considerations. Over 4.9 million loans have been approved by the SBA so far, worth more than $520 billion.

Contact us at (559) 431-5500 for assistance in compiling information for your PPP forgiveness application to present to your lender.

SBA issues update first PPP interim final rule following PPP Flexibility Act

On June 10, 2020, the Small Business Administration (SBA) issued an updated interim final rule for the Paycheck Protection Program (PPP) in response to the PPP Flexibility Act passed on June 5, 2020. The updated guidance accounts for revisions made to the covered period, usage of funds changes, extended safe harbors, and more.

Here is a quick rundown of the changes made by the PPP Flexibility Act.

Criteria

Prior Guidance

Current Guidance

Covered Period*

8 weeks from PPP loan disbursement

The earlier of 24 weeks from date of loan disbursement or Dec. 31, 2020.

Usage of Funds

Minimum of 75% of funds must be used for payroll to with a maximum of 25% for non-payroll costs to achieve forgiveness

Minimum of 60% of funds must be used for payroll with a maximum of 40% used for non-payroll costs to achieve forgiveness. If 60% of loans are not used for payroll, forgiveness is calculated on a sliding scale.

Extension of Safe Harbor for Compensation & FTE Reductions

Salary or hourly wage reductions must be reinstated by June 30, 2020, to avoid reduced forgiveness

Salary or hourly wage reductions have until Dec. 31, 2020, to be restored to avoid reduced forgiveness

Deferral of Loan Payments

6 months from loan origination date

Earlier of 10 months after the last day of Covered Period or when SBA remits the loan forgiveness funds to lender

Loan Maturity

2 years

Loans originated after June 5, 20205 years

Loans originated prior to June 5, 2020 – Borrowers and lenders may mutually agree to extend the maturity date of loans to 5 years

Safe Harbors Based on Employee Availability, Rehiring, New Hires

None

Forgiveness would not be reduced if borrowers can document in good faith:

-Inability to rehire individuals employed on Feb. 15, 2020

-Inability to hire similarly qualified employees by Dec. 31, 2020

Safe Harbors Based on Employee Availability in Compliance with HHS, CDC, or OSHA guidelines

None

Forgiveness would not be reduced if borrowers can document in good faith the inability to return to same level of business activity as before Feb. 15, 2020, due to compliance with requirements issued by HHS, CDC, OSHA from the period of March 1, 2020, to Dec. 31, 2020

Also of note:

  • *Borrowers may elect to stick with the 8-week covered period for loans originating prior to June 5, 2020. However, it is not clear if the June 30, 2020, safe harbor deadline still applies.
  • The amount of any Economic Injury Disaster Loan (EIDL) refinanced will be factored in when determining the percentage of proceeds for payroll costs.
  • It is unclear whether compensation limits formerly prorated based on 8 weeks now prorated based on 24 weeks.
  • It is unclear if the covered period may end prior to 24 weeks if funds have been used.

Further guidance and instructions are anticipated especially as they relate to the PPP Loan Forgiveness Application. Stay tuned for updates and contact us at (559) 431-5500 for assistance with your loan forgiveness application.

PPP Extension Bill

On June 5, 2020, the president signed into law the Paycheck Protection Program Flexibility Act after it passed the Senate with a unanimous vote. The bill drafted by the House extends certain provisions of the Paycheck Protection Program (PPP) to provide small businesses with relief in the timeframe and use of their PPP loan funds.

The most notable changes of the PPP Flexibility Act were:

  • Extension of the period to use funds from 8 weeks to the earlier of 24 weeks or Dec. 31, 2020, which provides relief for businesses with longer payroll schedules and greater leeway to reach maximum forgiveness.
  • Decrease in required use of funds for payroll from 75% to 60% - but the 60% is a cliff, meaning 60% of funds must be used for payroll expenses or none of the loan is forgiven. The first iteration of the PPP required 75% of the funds be used for payroll or only part of the loan would be forgiven. Some senators are still pushing for a sliding scale, which could result in an edit to the bill at a later date.
  • Deferment of payroll taxes for those who receive loan forgiveness, which was not allowed as part of the original CARES Act.
  • Extension of June 30 rehiring deadline to Dec. 31, giving employers more time to restore their workforce as the economy begins to reopen at various stages across the states.
  • Increased leeway on loan forgiveness for demonstrating rehiring challenges or reopening challenges including:
    • Inability to rehire an individual after a good faith effort who was an employee as of Feb. 15, 2020.
    • Inability to hire similarly qualified employees on or before Dec. 31, 2020.
    • Inability to return to same level of business activity prior to Feb. 15, 2020.
  • Increase of minimum loan maturity to 5 years from 2 years (the interest rate remains 1%).

Paycheck Protection Program (PPP) Loan Instructions and Tips

The Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law on March 27 provides $349 billion in funding for the Small Business Administration (SBA) in an effort to provide assistance and relief to America’s small businesses struggling under the weight of COVID-19. The Act includes a paycheck protection provision for small businesses by providing additional funding to the SBA for specific areas of need and expanding the SBA’s 7(a) loan program.  

Knowing what to expect before starting the loan process will help prevent unnecessary errors and rework. Completing the application process quickly and accurately will be key as there will be high demand and processing times will likely increase. We’ve put together the following summary of what business owners and individuals can expect when applying for the Paycheck Protection Program 7(a) loan.

Before you get started, you will want to:

Determine eligibility. 

Those eligible for the paycheck protection program include small businesses, nonprofit organizations, veteran organizations, and tribal businesses with less than 500 total employees (including full-time, part-time, and any other status) in operation on February 15, 2020. For the hospitality and food industries where multiple locations may result in over 500 employees, an exception was made to allow for up to 500 employees per physical location. Sole proprietors, independent contractors, and eligible self-employed individuals are also covered under this provision. Limitations apply for those making more than $100,000.

Businesses: Gather your information. You will need:

Applying for your loan will require certain information. While each lender may have different information, below is a summary of some of the information you may be asked to provide. 

1.     Average monthly gross payroll. Many major payroll providers are providing reports. If you   manage the payroll yourself, you will need to go through all of your payroll reports and calculate your monthly averages. You may use either the previous 12 months or calendar year 2019. Be sure to exclude compensation in excess of $100,000. For seasonal business, the applicant may average monthly payroll for the period between February 15, 2019 or March 1, 2019 and June 30, 2019. Any business that was not in business during that timeframe may use January 1, 2020 through February 29, 2020.

2.     Average monthly employee headcount. You will use the same time periods referenced above.

3.      Employer share of payroll taxes. These can often be found on your payroll reports and can also be found on your payroll tax returns.

4.     Payments for group health care coverage for employees, including insurance premiums.

5.     Employer contributions to defined benefit plans or defined contribution retirement plans.

6.     Calculate your benefits to employees. This may include costs for employee vacation, parental, family, medical, and sick leave.

7.     If you fall under the affiliation rules, be prepared to provide information related to your affiliated entities, including what is mentioned above and more. Under PPP, you may only receive one loan and your lender will likely ask for additional documentation on affiliated businesses regarding your eligibility.

Self-Employed: Gather Your Information

Applications are anticipated to open on April 10, 2020 for those who are self-employed. This includes sole proprietors without employees as well as independent contractors. While there hasn’t be a lot of information or guidance released for contractors and sole proprietors, below is information we anticipate you will want to have handy.

You will want to have your most recent (2019 ideally) tax return with a Schedule C. Your salary will most likely be determined by your net profit and this is reported through your schedule C.  If you haven’t filed your tax return, you can also find your net profit on your Income Statement. If you don’t have current bookkeeping, contact us today and we can help you get caught up.

Your monthly average payroll expenses will be your annual net profit divided by 12. If your annual net profit is over $100,000, you may only claim up to $100,000.

Your lender will want proof of your income. Documentation that you may want to collect includes:

-        Earning reports

-        Pay stubs

-        Invoices

-        1099s

Set Your Expectations.

-        Application process and times vary by lender. While the program overall opened on April 3, 2020 not all banks were prepared to accept applications.

-        Many lenders are requiring that you have a previous relationship with the lender in order to apply for the loan.

We are available to answer questions that will help you in your loan application process. Please contact our office for more information at (559) 431-5500.

CARES Act: Understanding the Paycheck Protection Provision (SBA 7a Loan) Program

The Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law on March 27 provides $349 billion in funding for the Small Business Administration (SBA) in an effort to provide assistance and relief to America’s small businesses struggling under the weight of COVID-19. The Act included a paycheck protection provision for small businesses by providing additional funding to the SBA for specific areas of need and expanding the SBA’s 7(a) loan program.

What are the changes to the 7(a) Loan Program?

In an expansion of the SBA 7(a) loan program, the CARES Act allows the SBA to serve as temporary guarantor for 100% of 7(a) loans of up to $10 million for small businesses to maintain payrolls and pay off debts. Previously, the SBA could only serve as guarantor for 75% to 85% of 7(a) loans depending on the type of loan.

Who is eligible?

Those eligible for the paycheck protection program include small businesses, nonprofit organizations, veteran organizations, and tribal businesses with less than 500 total employees (including full-time, part-time, and any other status) in operation on February 15, 2020. For the hospitality and food industries where multiple locations may result in over 500 employees, an exception was made to allow for up to 500 employees per physical location.

Sole proprietors, independent contractors and eligible self-employed individuals are also covered under this provision. Limitations apply for those making more than $100,000.

How do I qualify?

Small businesses that qualify as a result of COVID-19 include those adversely affected by:

-        Supply change disruptions

-        Staffing challenges

-        A decrease in gross receipts or customers

-        Closure

Applicants must certify they have been adversely affected by COVID-19, that they intend to take out only one paycheck protection program loan, and that they will use it for the designated purposes.

How much can I receive?

Most eligible applicants should receive approximately two months-worth of payroll costs. Loans will be determined based on the average total monthly payments for payroll costs incurred in the 12 months preceding the date the loan is made and multiplied by 2.5. In the case of seasonal employers, the average will be based on the 12-week period beginning on February 15, 2019. For any employer who was not in business between February 19, 2019, and June 30, 2019, the calculations will be based on your average monthly payments for payroll between January 1, 2020, and February 29, 2020. The covered period for the loan is from February 15, 2020, ending June 30, 2020, and the maximum interest rate for these loans has been capped at 4%.

What can I use loan money for?

Eligible recipients may use the loans to cover payroll costs, costs related to the continuation of health care benefits, such as paid sick, medical and family leave, employee salaries and commissions, rent, utilities, interest, or other debt obligations.

Am I required to provide a personal guarantee?

No, a personal guarantee will not be required, and no collateral shall be required for the loan.

Do I need to pay the loan back?

As outlined in the CARES Act, loans will be forgiven if the business or organization maintains the same number of average employees and as long as wages are not reduced by more than 25% during the covered period, which is the eight-week period beginning with the origination of the loan. The amount forgiven cannot exceed the principal amount of the loan.

Should there be any reduction in loan forgiveness, the recipient will be required to pay back the loan and may owe interest as outlined in their agreement.

Am I eligible if I rehire employees?

Yes. If a business or organization has laid off or furloughed employees and rehires them, they may still be eligible for the loan depending on the timing. If the timing of rehire falls outside of the covered periods, the amount of loan forgiveness may be adjusted.

How do I apply?

To apply for the 7(a) loan program, you must contact a bank, not the SBA. The SBA lists their most active 7(a) lenders on their website. If you have a current relationship with one of these lenders, start there. The loan will be issued at the bank’s discretion.

Loan application details will be forthcoming, and applications will be available through the lending institutions.

Planning for and beginning the application process for the paycheck protection program through the SBA 7(a) loans has begun. The SBA has released an application that can be found here. For more current information on applications, check with your local lender or the SBA website.  

For any questions on this loan program, please contact our office at (559) 431-5500.

Days until April 15

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