Paycheck Protection Program FAQs for Small Businesses
Where can I apply for the Paycheck Protection Program?
You can apply for the Paycheck Protection Program (PPP) at any lending institution that is approved to participate in the program through the existing U.S. Small Business Administration (SBA) 7(a) lending program and additional lenders approved by the Department of Treasury. This could be the bank you already use, or a nearby bank. There are thousands of banks that already participate in the SBA’s lending programs, including numerous community banks. You do not have to visit any government institution to apply for the program. You can call your bank or find SBA-approved lenders in your area through SBA’s online Lender Match tool. You can call your local Small Business Development Center or Women’s Business Center and they will provide free assistance and guide you to lenders.
Who is eligible for the loan?
You are eligible for a loan if you are a small business that employs 500 employees or fewer, or if your business is in an industry that has an employee-based size standard through SBA that is higher than 500 employees. In addition, if you are a restaurant, hotel, or a business that falls within the North American Industry Classification System (NAICS) code 72, “Accommodation and Food Services,” and each of your locations has 500 employees or fewer, you are eligible. Tribal businesses, 501(c)(19) veteran organizations, and 501(c)(3) nonprofits, including religious organizations, will be eligible for the program. Nonprofit organizations are subject to SBA’s affiliation standards. Independently owned franchises with under 500 employees, who are approved by SBA, are also eligible. Eligible franchises can be found through SBA’s Franchise Directory.
I am an independent contractor or gig economy worker, am I eligible?
Yes. Sole proprietors, independent contractors, gig economy workers, and self-employed individuals are all eligible for the Paycheck Protection Program.
What is the maximum amount I can borrow?
The amount any small business is eligible to borrow is 250 percent of their average monthly payroll expenses, up to a total of $10 million. This amount is intended to cover 8 weeks of payroll expenses and any additional amounts for making payments towards debt obligations. This 8 week period may be applied to any time frame between February 15, 2020 and June 30, 2020. Seasonal business expenses will be measured using a 12-week period beginning February 15, 2019, or March 1, 2019, whichever the seasonal employer chooses.
How can I use the money such that the loan will be forgiven?
The amount of principal that may be forgiven is equal to the sum of expenses for payroll, and existing interest payments on mortgages, rent payments, leases, and utility service agreements. Payroll costs include employee salaries (up to an annual rate of pay of $100,000), hourly wages and cash tips, paid sick or medical leave, and group health insurance premiums. If you would like
to use the Paycheck Protection Program for other business-related expenses, like inventory, you can, but that portion of the loan will not be forgiven.
When is the loan forgiven?
The loan is forgiven at the end of the 8-week period after you take out the loan. Borrowers will work with lenders to verify covered expenses and the proper amount of forgiveness.
What is the covered period of the loan?
The covered period during which expenses can be forgiven extends from February 15, 2020 to June 30, 2020. Borrowers can choose which 8 weeks they want to count towards the covered period, which can start as early as February 15, 2020.
How much of my loan will be forgiven?
The purpose of the Paycheck Protection Program is to help you retain your employees, at their current base pay. If you keep all of your employees, the entirety of the loan will be forgiven. If you still lay off employees, the forgiveness will be reduced by the percent decrease in the number of employees. If your total payroll expenses on workers making less than $100,000 annually decreases by more than 25 percent, loan forgiveness will be reduced by the same amount. If you have already laid off some employees, you can still be forgiven for the full amount of your payroll cost if you rehire your employees by June 30, 2020.
Am I responsible for interest on the forgiven loan amount?
No, if the full principal of the PPP loan is forgiven, the borrower is not responsible for the interest accrued in the 8-week covered period. The remainder of the loan that is not forgiven will operate according to the loan terms agreed upon by you and the lender.
What are the interest rate and terms for the loan amount that is not forgiven?
The terms of the loan not forgiven may differ on a case-by-case basis. However, the maximum terms of the loan feature a 10-year term with interest capped at 4 percent and a 100 percent loan guarantee by the SBA. You will not have to pay any fees on the loan, and collateral requirements and personal guarantees are waived. Loan payments will be deferred for at least six months and up to one year starting at the origination of the loan.
When is the application deadline for the Paycheck Protection Program?
Applicants are eligible to apply for the PPP loan until June 30th, 2020.
I took out a bridge loan through my state, am I eligible to apply for the Paycheck Protection Program?
Yes, you can take out a state bridge loan and are still be eligible for the PPP loan.
If I have applied for, or received an Economic Injury Disaster Loan (EIDL) related to COVID-19 before the Paycheck Protection Program became available, will I be able to refinance into a PPP loan?
Yes. If you received an EIDL loan related to COVID-19 between January 31, 2020 and the date at which the PPP becomes available, you would be able to refinance the EIDL into the PPP for loan forgiveness purposes. However, you may not take out an EIDL and a PPP for the same purposes. Remaining portions of the EIDL, for purposes other than those laid out in loan forgiveness terms for a PPP loan, would remain a loan. If you took advantage of an emergency EIDL grant award of up to $10,000, that amount would be subtracted from the amount forgiven under PPP.
Payroll Update: State unemployment guidance and actions due to COVID-19
Amid the unprecedented challenges that the coronavirus (COVID-19) public health emergency has imposed on workers and employers, states have been issuing information regarding unemployment insurance (UI) benefits. Guidance is being released daily and rules are being modified.
Alabama. The Alabama Department of Labor (ADOL) has announced in a news release that ADOL is offering temporary relief to employers for unemployment insurance (UI) benefit claims related to COVID-19. All charges will be waived against those employers who file partial unemployment compensation claims on behalf of their employees so that experience ratings will not be impacted. The waiver will continue until further notice. Employers will need to answer "Yes" when asked if the claim is COVID-19 related when they file partial unemployment claims beginning on March 23. Any claims filed from March 16 through March 20 will be addressed on a one-by-one basis. If an employer is unable to file partial claims for their employees, the employer should contact ADOL that they waive their right to respond to any BEN 241 (Request for Separation Information. The BEN 241 will still be mailed, however, employers will not need to respond if they notify ADOL in writing that they waive this right. Waivers may be emailed to Ben241waiver@labor.alabama.gov or by faxing (334) 309-9098. The statements should be on company letterhead, and should include the state unemployment insurance account number.
Arizona. Governor Ducey has issued Executive Order 2020-11, retroactively effective March 11, 2020, expanding UI benefits during the COVID-19 emergency. Workers will be eligible for UI benefits if: (1) the employer has ceased operation either permanently or temporarily; (2) the worker is under quarantine and does not have available paid leave even if the worker is expected to return to work after the quarantine; (3) the worker must leave due to risk of exposure or to care for a family member with COVID-19; or (4) any reason the Arizona Department of Economic Security determines is consistent with guidance provided by the U.S. Department of Labor. The one-week waiting period and work search requirements have been waived. An employer's experience rating will not be adjusted for claims related to COVID-19. The order will remain in effect until further notice.
Colorado. The Colorado Department of Labor and Employment (CDLE) has promulgated emergency rules to waive waiting week, job search, and benefit charging requirements during the COVID-19 emergency. The rules provide that a contributing employer's account will not be charged directly for any COVID-19 related UI benefit claims and therefore such claims will not impact the employer's rate. The emergency rules state that quarterly unemployment contribution payments and reports will be considered timely if: (1) a COVID-19 infection at the employer's workplace resulted in ceasing or reducing operations; or (2) the employer or an immediate family member has been requested to quarantine by a medical professional, local health office, or the Secretary of Health.
Iowa. Governor Reynolds has announced that the deadline for the first quarter unemployment tax payments that are due April 30 may be extended to July 31. Payments for both the first and second quarters are due July 31. Eligible employers include those employers with 50 or fewer employees and must be in good standing with no delinquencies in quarterly payments. Eligible employers who elect to take the extension must contact the Unemployment Insurance Tax Division by calling (888) 848-7442 or by sending an email to Q1tax@iwd.iowa.gov by Friday, April 24 at 4:30 pm. All employers must file the Quarterly Employers Contribution and Payroll Report electronically by 4:30 on April 24 to avoid a late report filing penalty.
Kentucky. Governor Beshear has announced changes in mass layoff parameters. Any employer with at least 50 employees, who is laying off at least 15 employees, is encouraged to file a claim on behalf of their employees through the E-Claims process. Employers who need additional information regarding the E-Claims process can contact UIeclaims@ky.gov.
The Kentucky Career Center, Division of Unemployment Services has updated its website with a set of FAQs. The FAQs note that the one-week waiting period for claims related to COVID-19 is waived. The work search requirement is waived if the worker has the reasonable expectation that they will return to work at a future date. The FAQs state that unemployment benefits are not currently available to self-employed individuals or contractors, however, the Governor is actively working on a solution and will be announcing information soon.
North Dakota. Governor Burgum has issued Executive Order 2020-08, effective March 13, 2020, that expands UI benefits for workers and cost-sharing with employers impacted by the COVID-19 emergency. UI benefits claimed due to a COVID-19 related reason will not be charged against the account of the employer. The register for work and work search requirements have been waived. Requirements under N.D. Cent. Code § 52-06-04 are suspended to the extent income reduction for business owners is required when calculating monetary eligibility for unemployment benefits related to COVID-19. The order remains in effect until rescinded.
Virginia. The Virginia Department of Labor and Industry (DOLI) has issued FAQs regarding Governor Northam's Executive Order No. 53 restricting nonessential businesses from operating. DOLI states that employers who are required to slow or cease operations will not be financially penalized for an increase in workers requesting unemployment benefits. The FAQs further note that workers are eligible to collect UI benefits if a workplace is temporarily closed or work hours are reduced.
West Virginia. Governor Justice has issued an executive order that expands UI benefits to workers due to the coronavirus (COVID-19) public health emergency. From March 16 through the duration of the state of emergency, the one-week waiting period, work search, able to work and available to work, and actively seeking work requirement are waived.
This article originally appeared in the March 26, 2020 edition of Checkpoint Payroll Update.
Checkpoint subscribers can find the latest tax and accounting news and analysis related to the ongoing COVID-19 (coronavirus) pandemic by searching or navigating to our new COVID-19 Guidance folder. This folder can be accessed from the top of the Table of Contents or included in searches (be sure to select it). The folder will be available beginning at 3:00 PM ET on Friday, March 27.
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