Paycheck Protection Program – Have You Applied?

On March 27, Congress enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act in response to this challenge. The CARES program provides billions of dollars to help small business owners keep their workers employed through the economic downturn.

The program is known as the Paycheck Protection Program (PPP).  This program provides federally guaranteed loans to small businesses and charitable organizations with 500 or fewer employees.  The businesses may operate as a corporation, partnership or as a sole proprietorship.

Should You Apply if You Have Not Yet Done So?

In a word, YES!  Even if I don’t think our company will need it?  Yes!  No one has a crystal ball to see the future, but these are uncertain times and your first priority is to keep your company going and protect your employees.  That is why we have been recommending that all our clients apply for a loan from the Payroll Protection Program.  Remember, you can always pay it back if business is good.

Start With Your Existing Banking Relationship

The best first step for many businesses would be to check with your existing financial institution.  Call your Bank Representative!  The bank will have its own specific process for you to begin, if it is authorized to provide these SBA loans.  The first few days the program went online were a little crazy as they worked on the high volume and new technologies, but it seems most banks have it under control at this point.  You have until June 30, 2020 to apply, although program funds may run out before this date.  Best advice, do NOT wait, get your application in now!

What Can Funds Be Used For?

If you can give a good faith certification (located on the application form) that current economic uncertainty makes a loan to support your ongoing operations necessary and will use the funds to retain workers or to make mortgage, lease, and utility payments, you should qualify for the program.  You can borrow up to 2 ½ months of payroll costs up to $10 million.  The costs include wages (up to $100,000 annually per employee), some taxes, and benefits.

Possible Forgiveness of Loan

These loans are also partially or fully forgivable.  If you can show that your business used the funds SPECIFICALLY to pay allowed expenses during the 8-week period after the loan proceeds are received, you may have the loan forgiven.  You can also use the funds to rehire laid off employees.  The interest on the loan will also be forgiven in proportion to the amount of principal forgiven.

The US Chamber of Commerce has a very useful guide at https://www.uschamber.com/report/covid-19-emergency-loans-small-business-guide.

There are many details that have not been clarified by the IRS.  We expect them to be clarified within the next few days and weeks.  Please give us a call or email us if you have specific questions and we will do our best to help you through the new rules.