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Prepare For A Paycheck Protection Program (PPP) Loan Application

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  1. The application process will primarily be through an online portal with your bank and should be very fast (days). If there are potential conflicts, your application will likely enter an ‘exception’ process – which may involve a lot more time – in a manual process, so preparation is important.
  2. Talk to your CPA. Decide how much money you want to apply for (max is 2.5 times average 2019 payroll or $10M, whichever is less). Remember, THIS IS A LOAN even though it has attractive forgiveness provisions. There are lending parameters, interest rates, payment requirements and tax implications that need to be considered.
  3. Talk to your attorney to make sure you can testify (under penalty of perjury) that you are eligible according to the 3 eligibility requirements:
  4. Have less than 500 employees (all affiliates regardless of location)
  5. Are the sole-proprietors, self-employed individuals or independent contractors
  6. Were in business (making payroll) on February 15, 2020
  7. Contact the SBA liaison at your bank to indicate your intent and receive any specific instruction. Though all SBA lending partners will have to use an SBA-approved process, there may be an “invitation” protocol to avoid overloading web and bank resources.
  8. Prepare to certify that there is no conflict in your application. This means that the business (not the bank nor the SBA) will take on loan liability themselves.
  9. You cannot apply for two PPP loans
  10. You cannot have an SBA EIDL loan for the same use as a PPP loan.
You need to decide what you want to use the PPP money for (i.e. payroll support, such as employee salaries, paid sick or medical leave, insurance premiums, or mortgage, rent, and utility payments)
If you have already applied for the EIDL loan to use for payroll and operating expenses, you likely won’t be able to justify a PPP loan
  1. Be prepared to provide normal loan documentation, including the following: 2019 employee payroll statements, 1099 costs (no 1099 for services), Health care costs and Company retirement plan costs. The requirements are still being refined based on the language of the Act.
PPP Loan Forgiveness Details
  • 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.
  • 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.
  • Any remainder of the loan that is not forgiven will operate according to the loan terms (i.e. 4% interest, payment over 10 years). 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.
  • 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.
  • At some point the PPP program will come full-circle. Though there is a minimum of paperwork up front, when forgiveness is requested, paperwork will likely be required. Be prepared to fully account for how the money was spent in detail – linking dollars-received to dollars-spent.
If you have questions call Ben Evans on his cell phone at 405-880-1280.
Remember according to the SBA, these loans may be used to pay fixed debts, payroll, accounts payable and other bills that cannot be paid because of the impact of COVID-19.