What’s Available & How To Apply
April 2, 2020Process Flow & Timeline
Application Approval Loan Origination Spending Window ForgivenessRequest for Repayment Begins
Application Loan Origination
Approval at Bank takes
~2-3 weeks, with an additional one (1) week
at SBA Accepted 4/3/2020
through 6/30/2020
Date money is received!
1 3
1 2 3 4 5 6
Approval 2
Spending Window Repayment Begins
ASAP once 8-week Spending Window is
complete
Open Window; however for forgiveness consideration, funds
must be spent within 8 weeks
from Loan Origination
6 months after origination date or 12 months with extension
Coronavirus Aid, Relief, & Economic Security Act
• Passed by Congress on March 27, 2020
• Administered by the Treasury Department
• Allocates Funds to Non-Profit Organizations
• Non-Profit Organizations = an organization defined in section 501(c)(3) of the Internal Revenue Code and exempt from taxation under section 501(a) of the IRS code
• Primary Loan Program = Paycheck Protection Program [PPP]
• Statutory Bars to Receiving Funds:
• Current bankruptcy proceedings
• Delinquent or defaulted SBA loans within the past 7 years
Paycheck Protection Program: Overview
• Emergency Small Business Loans (SBA 7(a) loans)
• Aggregate loan amount is capped at $10 million
• Maximum interest rate of 4%
• Treasury Guidance – 0.5%
• Available through June 30, 2020
• No personal guarantee or collateral is required
• Total SBA 7(a) loan amount cannot exceed the amount of pre-existing SBA loans being refinanced under the program
• Loan cannot exceed 2.5 times the average monthly payroll cost during the year prior to the loan
Paycheck Protection Program: Calculation
• List of all employees in 2019 with all compensation • Possible Sources
• ADP has report
• Same data as provided for 401k if prepared • Box 5 of each employee W-2
• Compensation for each employee is either Box 5 or $100,000, whatever is greater. • Total it all up and divide by 12
• Multiply by 2.5
• Amount to apply for
Paycheck Protection Program: Utilization
• The Loan Can Cover:
• Payroll
• Healthcare Costs
• Mortgage Interest Payments
• Rent
• Utility Payments
• Debt Service
• Interest on any other debt obligations that were incurred before the covered period
Alternative: Employee Retention Payroll Tax Credit
• Available to organizations that do not receive PPP funds
• If you receive PPP funds, you are ineligible for the ERPTC
• Operations must be fully or partially suspended due to COVID-19 related shutdown orders
• Gross receipts must have declined more than 50% compared to the same quarter in the prior year
• Refundable payroll tax credit equal to 50% of “qualified wages”
• For eligible employers with more than 100 employees, those are wages paid to an employee even though the employee is unable to work due to a governmental “stay at home” order
• For eligible employers with 100 or fewer employees, “qualified wages” include all wages paid whether the employer is open for business or subject to a shutdown order
• Qualified wages includes health plan expenses
Paycheck Protection Program: Forgiveness
• Subject to the direct lender’s approval
• The amount forgiven is lowered by reductions in full-time employment and
where total salaries and wages fall by more than 25% from the applicable prior period
• This can be mitigated by rehiring employees
• Forgiveness Application must identify financial information including:
• Aggregate amount of payroll payments
• Interest payments on mortgage obligations
• Rent payments and utility payments made during the eight-week period following loan origination (expected to be limited to 25% of forgiveness amount)
Paycheck Protection Program: Covered Costs?
• Will Cover:
• Salary, wage, commission, or similar compensation; payments of cash, tip or
equivalent; payment of vacation, parental, family medical or sick leave; allowance for dismissal or separation
• Will Not Cover:
• Compensation of an employee in excess of $100,000/year ($8,333/month; $1,923/week) prorated for February 15, 2020 through June 30, 2020
• Federal income taxes
• Compensation for employees who principally reside outside the US
• Qualified sick and family leave wages for which a borrower receives a credit under 7001 and 7003 of the Families First Coronavirus Response Act (FFCRA)
Paycheck Protection Program: Covered Costs?
Healthcare & Retirement Benefits
• Will Cover:
• Group Healthcare Benefits, including insurance premiums • Payroll Taxes
• Retirement Benefits: • 401K or 403B
• Payments to independent contractors that are not greater than $100,000 in 1 year, as prorated for the covered period
• Will Not Cover:
• Shall not include compensation of an individual employee in excess of annual salary of $100,000 as prorated for the covered period. (Pages 10 through 13 of CARES Act)
Paycheck Protection Program:
Application
Administered though existing SBA approved lenders
Treasury Department has indicated that they will work to certify new lenders
Must certify that current economic uncertainty makes the loan request necessary
Documentation in addition to application – depends on bank. Expect to include:
Organization Documents – Articles of Incorporation, By-Laws, Board Roster, Tax-Exempt Letter
Board Authorization – Reach out to ICLC for Sample
