After much discussion the SBA has now opened its application process for SBA lenders to begin enabling small business owners to begin applying for the Paycheck Protection Plan Loan.  As this the program opened additional final interim guidance was issued clearing up several key ambiguities in the program and its process.  

You should note that most lenders are handling the loan requests prioritizing their current lending relationships first, so that is the best place for you to start.

Here is some information that might be useful:

Paycheck Protection Program

Under the CARES act signed on March 27^th, 2020 the SBA will receive funding and authority to modify existing loan programs and establish a new loan program to assist small businesses nationwide adversely impacted by the COVID-19 emergency.  The new program provides for forgiveness of up to the full amount of qualifying loans guaranteed under the PPP.

When and where to apply

• Opened April 3, 2020 through June 30, 2020 – or until funds are exhausted
• SBA qualified lenders – they are looking for this to be a complete electronic process

Amount

• $349 billion total, $10 million cap, entity amount based on calculation

Loan forgiveness

• The loan may be partially or completely forgiven, We are currently awaiting SBA guidance on how this is calculated

Eligibility 

• 500 or fewer employees
• Were in operation on 2/15/2020 and either had employees or subcontractors on that date
• Also applies to sole proprietorships, self-employed individuals
• Not engaged in any activity that is illegal under federal, state or local law
• No household employees
• No criminal charges or convicted of a felony for 20% or more owner
• No previous delinquency of SBA or federal loan within the past seven years

Calculation 

1. Calculate aggregate “payroll costs” from the last 12 months (calendar year 2019)
2. Subtract any “compensation” paid to an employee in excess of $100K per year
3. Calculate the average monthly payroll costs (divide by figure derived after step 2 by 12)
4. Multiply the average monthly payroll by 2.5
5. If an Economic Injury Disaster Loan (EIDL) was received add the outstanding amount made between 1/31/2020 and 4/3/2020 less the amount advanced through an EIDL Grant  (since it does not have to be repaid)

Definitions

• Payroll costs compensation in the form of salary, wages, commissions or similar compensation, employee benefits consisting of group health benefits including insurance premiums and retirement plan contributions.  No FICA, FUTA.

Documentation necessary

• Payroll processing records
• Payroll tax filings
• Form 1099-Misc(for independent contractors that are applying only)
• Income and expenses
• Banks may require additional documentation as required

We are actively monitoring key developments in this area and will advise as changes are made as we move forward.  There are still many unanswered questions at this point, and you have our commitment that we be on top of these changes as they occur and will also be transparent and clear.

As your trusted business advisors, we at Polk and Associates remain committed to assist you during this extraordinary time.  Please reach out to us with questions you may have as we stand with you as we weather this extraordinary crisis.

Polk & Associates

Large enough to serve a diverse clientele, yet small enough to maintain a hands-on approach, we are committed to maintaining the highest accounting and ethical standards with continuous education, extensive research resources, and excellent quality control.

Polk and Associates is a member of the Michigan Association of Certified Public Accountants, and the American Institute of Certified Public Accountants. The firm participates in the AICPA Peer Review Program, and has always received the highest level of award for its audit practice and quality control.