COVID-19 Resources Q&A

This page will be updated as needed for our clients to see answers to commonly asked questions by other clients as we all go through this process together. This page is NOT intended to be all-inclusive information about the respective resources available to you. You ultimately make the decision of your company and its finances and what course of action you and your company take.

In addition, as this process is ongoing subsequent amendments and updates may have occurred that have NOT been updated here.

Additional blog posts about various COVID-19-related topics are also available.

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Last updated 5/26/20

Q. What is PPP?

Paycheck Protection Program is the new SBA loan program whereby the SBA will loan funds to a small business. If used to pay employees for the next 2.5 months, the loan may be forgiven. As of 4/2/20, we are waiting on clarification on the definition of the SBA loan terms, repayment plans, loan base calculation, and how the loan may be forgiven.

Q. What is the definition of gross payroll?

We are awaiting the clear definition of this to include on your application?

updated 4/4/20:

“Aggregate Payroll Costs”, as defined in the SBA Interim Final Rule (and the technical term) in section f “Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on the compensation of employees; and for an independent contractor or sole proprietor.

Q. Can I include subcontractors or overhead in the loan calculation?

No. Your base loan computation is a function of your aggregate payroll costs, limited to $100,000 in compensation per employee, plus the cost of employee benefits the Company pays for of a group health care plan, retirement benefits, and any state and local taxes assessed on the compensation of employees.

Sub-contractors would have to apply for their own PPP. Sub-contractors are explicitly stated as they “do not count for purposes of a borrower’s PPP loan calculation”.

Q. Am I eligible?

If your business was in operation as of February 15, 2020, and either had employees for whom you paid salaries and payroll taxes or paid independent contractors on Form 1099-Misc. You have less than 500 employees and fall under the SBA definition of small business (in short, your net income after taxes was less than $5 million of the prior two-year average). You must be a U.S.-based business.

Q. How much can I borrow?

You can borrow up to 2.5 months’ worth of qualified payroll costs (see above update).

Q. Do I have to repay and if so, how much and for how long?

If you use the loan proceeds to cover 75% of payroll going forward (i.e. your current payroll must be then at a minimum of 75% of what your borrow case computation was computed at), the loan will be forgiven. It has not yet been disclosed how the loan will be forgiven, look for future updates. The remaining 25% of the loan may be used to cover rent and interest/principal on other loans you have outstanding; if the money is used for any other purpose, it will then have to be repaid. The term of the loan is for two years.

The loan will be deferred for six months following the date of the disbursement. The loan will accrue at 1% from the date disbursed until paid in full (or forgiven). You may also ask for a one-year deferment after the initial six-month window expires.

Q. Who do I get the PPP from?

You should begin the process with your business banker. They may have a separate website to apply for this, they may request you fill out certain payroll “templates” (Note: If you completed the one sent out as an example on Sunday, March 24 Apr. 10 a.m., your payroll information will be readily available for you to fill out). Make sure you clear the “cache” in your internet browser to make sure it is resetting so that an updated web page shows up on your browser! If you don’t know how to do this, search “how to clear my cache in browser xx” (where xx is the browser you currently are using).

Q. My bank is not ready, what do I do now?

Be patient, like you, your bank’s legal and IT team are reviewing requirements and updating systems to allow for the proper flow of funds. As of this update, 4/4/20, even the SBA portal is not yet up and available for processing. IT IS ADVISED, DO NOT APPLY BOTH ON YOUR BANK SITE AND SBA SITE FOR THE PPP LOAN. If your bank is not a participating SBA lender, you will have to wait for the SBA portal to open to apply, review your bank’s website for their specific details/comments.

Updated 4/9/20, after discussing with certain lenders, it may be wise to apply with multiple banks, in an effort to get the loan approved; however, you can ONLY have one PPP loan outstanding. If you are approved and to be funded under Bank A, when Bank B calls/emails you to discuss funding, you MUST terminate that loan application at Bank B.

Q. I am self-employed, do I qualify for the PPP?

On Friday, April 10, the SBA PPP program will begin for self-employed individuals (i.e. sole proprietors, and independent contractors). Your business had to be in operation on February 15, 2020.

Q. I am self-employed, how much can I qualify for?

Similar to other small businesses, your “monthly base” will be used. Review your schedule C on your 2019 tax return (or your information to prepare this schedule). Like other small businesses under the PPP program, self-employment net earnings are capped at the lesser of $100,000 or your self-employment earnings, annually, plus other wages you pay out to other employees via your sole-proprietor business. A reminder that self-employment net earnings are 92.35% of your Schedule C, or can be found on line 4 of Schedule SE, plus any pension plan in place related to this business.

As a sole proprietor you may have to show more documentation to support your business, such as payroll records, 1099-misc, income/expense reports, bank records, etc.

Q. My small business is seasonal, how do I compute my eligible amount?

Consider activity during the “seasonal period” would be a more accurate reflection of a business’s operations.

Q. My small business was not fully ramped up on February 15, 2020. Am I still eligible?

In evaluating a borrower’s eligibility, a lender may consider whether a seasonal borrower was in operation on February 15, 2020, or for an 8-week period between February 15, 2019, and June 30, 2019.

Q. When does that eight-week period begin to measure payroll paid (out of the PPP loan)?

The eight-week period begins on the date the lender makes the first disbursement of the PPP loan to the borrower. The lender must make the first disbursement of the loan no later than ten calendar days from the date of loan approval.

See earlier comment re: 75% rule on the use of funds.

Q. Is the PPP loan guaranteed by me, the borrower?

NO, there is no personal guarantee under this program, however, if the funds are used for fraudulent purposes, the US Government will pursue criminal charges against you.

Q. Self-employed general comments

Under the PPP plan for small businesses, it specifically states “group health care coverage” is included as “payroll costs”. If you are a sole-proprietor with a solo insurance plan (i.e., for you and your family only), it is not clear if this insurance cost can be added to your base (at the moment). It is not clear, how a sole proprietor’s loan under the PPP will be forgiven if they do not have any other employees, as the Self-employed “group” is open for the loan application April 10, 2020, it is expected this will be clarified.