A portion of the CARES stimulus package is known as the Paycheck Protection Program (“PPP”), and provides low interest loans to small businesses adversely affected by the Coronavirus pandemic, and the resulting economic shutdown.
This $350 Billion Fund has been set aside to help businesses maintain cash flow and payroll to prevent or limit employee layoffs. Presently, the PPP provides financial resources for just over four (4) months’ (2/15/20 to 6/30/20) of certain operating costs (payroll; rent; insurance; utilities, etc.).
FAQs
Am I eligible?
Likely yes. Small businesses including non-profit 501(c)(3)’s, sole proprietorships, independent contractors and self-employed individuals are invited to apply if your business meets these requirements: • in operation as of 2/15/2020 • with less than 500 employees • reporting employees with paid payroll taxes or paid independent contractors reported on a 1099-MISC • hospitality or restaurant businesses qualify with under 500 employees per location.
What can I borrow?
The maximum loan amount for a covered loan is the average monthly payments for payroll costs incurred during the 1-year prior multiplied by 2.5, not to exceed $10 million. • For businesses that have been in operation for 1 year or more, the applicable period is 12 months preceding the date on which the loan is made. • You can include any refinancing of the balance on any Economic Injury Disaster Loan (EIDL) originated after January 30, 2020 that was not used for the same purpose.
What can I use the PPP loan for?
Payroll costs • Costs related to continuation of group health care benefits during periods of paid sick, medical or family leave and insurance premiums • Employee salaries, commissions or similar compensation • Interest payments on any mortgage obligation (NOT any principal payments) • Rent/lease payments • Utilities • Interest on any other debt obligations that were incurred before February 15, 2020.
What is included when calculating payroll costs?
Payroll costs include: • salaries, wages, commissions or similar compensation • payment of cash tips or their equivalent • payment for vacation, parental, family medical or sick leave • allowance for dismissal or separation • payment for group health care benefits including insurance premiums • payment of retirement benefits • payment of state/local tax assessed on the compensation of employees • the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is compensation from self-employment (limited to $100,000 per year as prorated for the covered period).
Payroll costs cannot include: • individual compensation in excess of $100,000 per year as prorated for the covered period • federal payroll taxes (Chapters 21, 22 or 24 of the Internal Revenue Code) • employee compensation whose principal place of residence is outside the U.S. • qualified sick leave or family leave wages for which credit is allowed under the Families First Coronavirus Response Act.
Is the loan forgivable?
Yes, and the total amount forgivable equals what you pay in eligible payroll costs (covering 8-week period starting on the loan origination date) • Costs can include: • payroll costs • rent payments • payments of interest on any covered mortgage obligation and utilities • Total forgiveness cannot exceed the principal financed.
The forgiveness could be negatively impacted if: • You reduce the number of employees compared to last year • You reduce the pay of any employee by more than 25% compared to last quarter • If you terminated, furloughed or laid off employees from February 15, 2020 through April 26, 2020, you will not be penalized if you re-hire the employees by June 30, 2020.
What are other important loan details to know?
The SBA guarantee is 100% • Payments may be deferred for 6 to 12 months, as determined by the lender • The requirements for collateral, personal guarantee and “no credit available elsewhere” are expressly waived • The interest rate is set by the lender but not to exceed 4% on any portion not forgiven • Maximum term is 10 years from the date the borrower applies for forgiveness.
What fees apply?
The SBA will not charge any annual or guarantee fees, and all prepayment penalties are waived
At Aloia Roland, we care deeply about our Southwest Florida community and the part each of you play. If we can help you by answering any questions, or help by assisting you in completing and organizing the needed information so that you can apply for a PPP loan, please let me know, as we are here to help.
Links & Resources
- To review additional recommendations from Frank J. Aloia, Jr., click here.
- To read the bios of our business attorneys, Frank J. Aloia, Jr. , Jack C. Morgan III and Garrett W. McIntyre, click their names.
- Review each of their practice areas at LawDefined.com/WhatWeDo
- Review all of our team’s bios at LawDefined.com/WhoWeAre.
- For a consultation, call the office at (239) 791-7950 or email [email protected].
Looking for guidance?
We are available to review the options with you.
Click HereAloia, Roland, Lubell & Morgan, PLLC is a full-service law firm with practice areas in wills, trusts and estates, business and real estate law, commercial litigation, personal injury law, class action litigation and family law. Established in 2004 and led by senior partners, Frank Aloia, Jr., Ty Roland, Evan Lubell and Jack Morgan III, the firm has deep roots in Southwest Florida, proudly serving its community with eight attorneys and more than 20 support staff.
