Paycheck Protection Program
COVID-19 Relief and What it Looks Like
Small businesses across the country are looking for solutions to keeping staff paid while keeping them safe. This short term solution may just work.
What is the Paycheck Protection Program (PPP)?
The PPP is part of the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) which is intended to provide financial stability for small businesses while Shelter in Place orders are in effect and/or while business is disrupted by the Coronavirus by providing funding to businesses to sustain payroll to their employees.
How does the PPP provide funding? If you're looking for over $10,000 you need to apply through an Small Business Administration (SBA) authorized bank. Most banks in the Springfield area participate in SBA lending but you should check with the lending officer to make sure they are fulfilling PPP loans. The funds are considered a loan, however if you follow the PPP guidelines up to 100% of the loan can be forgiven, meaning you don't have to pay it back. It is also excluded from income so you do not have to pay taxes on the forgiven amount.
These are the main guidelines to follow:
The maximum loan amount is 2.5 times the average monthly Payroll Costs calculated by using your 2019 expenses. If your business is considered new you may be required to us January 1 - February 29, 2020 Payroll Costs to determine the average.
Spend at least 75% of the proceeds on Payroll Costs which include wages, commissions, tips, state and local tax expense, employer portion of health insurance premiums, and employer portion of retirement contributions.
The other 25% can be spent on utilities, rent, and interest from mortgage or other debt obligations.
You also must maintain the same number of employees that you had on February 15, 2020.
Lastly, if not most importantly, the amount of loan forgiveness is capped at how much of your expenditures meet the above criteria and are paid within 8 weeks of your loan being funded.
So who qualifies for the PPP and how do I apply? If you believe your business has been significantly impacted by the COVID-19 epidemic and you had Payroll Costs prior to February 15, 2020 you are eligible. Impacted can include being shut down by a Shelter in Place order, or even things such as supply lines being interrupted.
We would love to assist your business during it's time of need by working directly with your lenders to supply information they require to submit the SBA application. There are many more details to these loans but this summary is intended to highlight the big picture requirements and is not considered exhaustive. Please remember to be patient with your banks and Accountants as we all work through this together!