Are you affected by the Coronavirus Shutdown?
The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program, the initiative provides 100% federally guaranteed loans to small businesses
Importantly, these loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward.
Here are the details as we know them at the beginning of April 2020.
Who Qualifies?
You are eligible if you are:
- A small business with fewer than 500 employees
- A small business that otherwise meets the SBA’s size standard
- A 501(c)(3) with fewer than 500 employees
- An individual who operates as a sole proprietor
- An individual who operates as an independent contractor
- An individual who is self-employed who regularly carries on any trade or business
- A Tribal business concern that meets the SBA size standard
- A 501(c)(19) Veterans Organization that meets the SBA size standard
What will Lenders be Looking For?
In evaluating eligibility, lenders are directed to consider whether the borrower was in operation before February 15, 2020 and had employees for whom they paid salaries and payroll taxes or paid independent contractors.
Lenders will also ask you for a good faith certification that:
Hurt by Shutdown
The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations
Use the Proceeds to Keep Business Alive
The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments
No other Application Pending
Borrower does not have an application pending for a loan duplicative of the purpose and amounts applied for here
No Other Relief Loan
From Feb. 15, 2020 to Dec. 31, 2020, the borrower has not received a loan duplicative of the purpose and amounts applied for here
If you are an independent contractor, sole proprietor, or self-employed individual, lenders will also be looking for certain documents (final requirements will be announced by the government) such as payroll tax filings, Forms 1099-MISC, and income and expenses from the sole proprietorship.
Ready to Apply for a Loan Now?
How Much can I Borrow?
Loans can be up to 2.5 x the borrower’s average monthly payroll costs, not to exceed $10 million.
How do I calculate my average monthly PAYROLL COSTS?
For Employers
The sum of payments of any compensation with respect to employees that is a:
• salary, wage, commission, or similar compensation;
• payment of cash tip or equivalent;
• payment for vacation, parental, family, medical, or sick leave
• allowance for dismissal or separation
• payment required for the provisions of group health care benefits, including insurance premiums
• payment of any retirement benefit
• payment of state or local tax assessed on the compensation
of the employee
For Sole Proprietors, Independent Contractors, and Self-Employed Individuals
The sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in one year, as pro-rated for the covered period.
For Employers
1. Compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the period February 15, to June 30, 2020
2. Payroll taxes, railroad retirement taxes, and income taxes
3. Any compensation of an employee whose principal place of residence is outside of the United States
4. Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116– 5 127); or qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act
PAYROLL COSTS for Loan
Calculate this number as the basis for figuring out the total amount of the load you can take out.
Maximum Loan =
2.5 x Average total monthly payroll costs incurred during the year prior to the loan date
For non-seasonal employeeL
Will the Loan be forgiven?
Borrowers are eligible to have their loans forgiven.
How Much?
- A borrower is eligible for loan forgiveness equal to the amount the borrower spent on the following items during the 8-week period beginning on the date of the origination of the loan:
- Payroll costs (using the same definition of payroll costs used to determine loan eligibility)
- Interest on the mortgage obligation incurred in the ordinary course of business
- Rent on a leasing agreement
- Payments on utilities (electricity, gas, water, transportation, telephone, or internet)
- For borrowers with tipped employees, additional wages paid to those employees
- The loan forgiveness cannot exceed the principal.
How could the forgiveness be reduced?
The amount of loan forgiveness calculated above is reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees.
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