• Wed, Apr 01, 2020
  • Applications for Small Business Payroll Protection Program - Open Friday, April 3rd
  • Small_business_administration_coronavirus
  •  There are two types of Corona loans:

    1. The Paycheck Protection Program (PPP) Loan from the bank;
    2. The Economic Injury Disaster Loan (EIDL) direct from the SBA online. 

    I suggest small business owners apply for both if applicable, and as soon as you can.

    The Paycheck Protection Program (PPP)

    Small businesses and sole proprietorships:
    You can apply for the PPP Payroll Protection Program loans starting this Friday, April 3rd.

    Independent contractors and self-employed individuals:
    You can begin applying starting on April 10.

    • These are potentially forgivable loans equal to approximately 2-1/2 months average payroll.
    • The PPP loans must be spent on specific types of expenses (payroll, rent, etc) within eight weeks of receipt to be forgiven. 
    • They must be spent to re-employ people and pay certain other qualified expenses. 
    • See the borrower instructions link below for details (read them carefully).

    Key elements of the loan program:
    • The covered period is 2/15/2020 to 6/30/2020;
    • 100% of the loan amount is SBA guaranteed;
    • There is no up-front SBA fee;
    • The maximum interest rate is 0.5%;
    • There is no collateral required;
    • There is no personal guarantee;
    • There is no prepayment penalty;
    • The initial payment is deferred for 6 months;
    • Maximum loan is the lesser of $10,000 or 2.5 times your monthly payroll;
    • Payroll costs must constitute 75% of the loan;
    • Rent, utilities, and interest on mortgages are also covered;
    • Payroll equals employee compensation, cash tips, vacation/parental/family/medical/sick leave, allowance for dismissal or separation, group health benefits, retirement benefits, and state and local taxes on compensation.

    Key elements of loan forgiveness:
    • Formula is (PPP loan amount) multiplied by (the average number of full-time employees per month during the covered period) divided by option 1 (the average number of full-time employees per month between 2/15/2020 and 6/30/2020) or option 2 (the average number of full-time employees per month between 1/1/2020 and 2/29/2020);
    • If employee wages were cut by more than 25% during the most recent full quarter before 2/15/2020, this amount will become a full-time loan at 5% interest for 24 months.

    The Treasury urges those in need of funding to apply quickly, as the program has a cap (349 Billion) and demand is high.

    All businesses – including nonprofits, sole proprietors, self-employed individuals, independent contractors, (and certain others) can apply.

    This loan app is submitted to your SBA Lender (typically a bank).

    The loan application is here:  https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf

    Borrower instructions are here:  https://home.treasury.gov/system/files/136/PPP%20Borrower%20Information%20Fact%20Sheet.pdf

    Lender instructions are here:  https://home.treasury.gov/system/files/136/PPP%20Lender%20Information%20Fact%20Sheet.pdf

    Check with your bank for the documents you are required to submit with your application.  Here is an example of a checklist of documents you may need to submit with the application:

    SBA Paycheck Protection Program Application Form    
    SBA Form 1919    
    Articles of Incorporation    
    Bylaws - (if applicable)    
    Tax/EIN - Proof of ownership    
    Corporate - Previous fiscal year P&L    
    Corporate - Current fiscal year-to-date P&L    
    Corporate - Last two fiscal years of completed tax returns    
    Corporate - State (previous fiscal year) Employer's Annual Federal Unemployment (FUTA) Tax Return    
    Corporate - Previous fiscal year - W-3 Wage and Tax Statement    
    Corporate - Year-to-date of current fiscal year payroll reports (include as much documentation possible)    
    Corporate - Previous fiscal year - W-2s Wage and Tax Statement (all employees including owners)    
    Corporate - Current fiscal year-to-date - Payroll Account Activity Reports    
    Corporate - Previous fiscal year - Payroll IRS Form 941    
    Corporate - Previous fiscal year - Payroll IRS Form 944 (companies with under $1,000 tax liability)    
    Corporate - Rent and utilities invoices and copy of payments for the last 12 months     
    Corporate - Copy of general liability insurance certificate    
    Corporate - COVID-19 impact statement    
    Corporate - Eight-week forecast of payroll, rent or mortgage interest and utilities    
    Corporate - Determine a plan to rehire any workforce reduced due to COVID-19 (if applicable)    
    Personal - Form 4506-T    
    Personal - Two most current tax returns    

    Your best bet is to go through your own bank for this loan as other lenders will likely be overwhelmed with their own clients.  Most banks I have spoken to have stated they will prioritize their own clients first.

    Talk to your banker if you have any questions!

    Economic Injury Disaster Loan (EIDL)

    EIDL is a grant that does NOT need to be repaid.  The maximum amount of the grant is $10,000 or $1,000 per employee based on the number of employees as of January 1, 2020.   
    This grant must be applied for on the SBA website and have been covered at length in prior videos and blogs on our website:  See this blog in particular:  https://www.edisonba.com/articles/video-how-to-apply-for-an-sba-disaster-loan  

    The loan application is here:  https://covid19relief.sba.gov/#/

    Borrower instructions and qualifications are included in the online loan form.

    Eric J. Gall
    [email protected]