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the sba payment
protection Loan
LLC, S Corp, C Corp, Other Business Entities
Sole Proprietors, Self-Employed, Single Member LLCs & Independent Contractors
Who Can Apply?
Under the PPP, small businesses are defined as places employing fewer than 500 employees per physical location. Simplicity has partnered up with local lenders and asked them to spell out exactly what is the Payment Protection Act (PPA or PPP). The first thing that cought our attention it "Although the federal government is the source of the funds, the money will be dispersed in large part through local lenders, as per the SBA’s usual model".
The 500 number is determined by a straight head count—the total number of full and part-time employees, not full-time equivalents (FTEs)
Your employees and revenues must have been negatively impacted by COVID-19 pandemic. The actual standard states that the loan is necessary because of “current economic uncertainty.”
For the PPP, the SBA is waiving its usual requirement that applicants prove they have thought financing elsewhere. The assumption is that those resources are not available within a feasible timeframe, if at all.
How Much Can I Borrow?
Qualified businesses are eligible for 2.5 times their normal monthly payroll costs, as determined by what they paid before Feb. 15, with two important qualifications. The total loan amount is capped at $10 million, and per-employee pay exceeding $100,000 is excluded from the calculation. Pay for employees residing outside of the United States is excluded.
1099 contractors pay can be included in the calculation. Operators in states with a tip credit can apparently use staffers’ total wage, and not just the amount paid directly by the employer, though the language of the Act is imprecise on that point.
The compensation of employees who were laid off but rehired can be factored into the loan amount provided they’re brought back by June 30. That provision is intended to entice employers to rehire quickly as the crisis wanes. Payroll documents will need to be submitted with applications.
How Will I Be Evaluated?
The PPP was conceived as a way of keeping employees on the payroll of business that can’t draw the needed funds from their revenues. Toward that end, the loans are intended for businesses that were viable prior to Feb. 15.
However, a number of no-go’s for loans have been suspended. Lenders will not be looking at collateral to back the loans, nor an inability of the applicant to secure credit elsewhere. And personal guarantees of the loans are not required of proprietors.
What Can I Use the Funds For?
The main aim of the PPP is to keep employees on the payroll for the eight weeks following the grant of a loan. But in addition to maintaining pay, restaurateurs can use the funds to pay their mortgage, rent or utility charges.
What Are My Fees?
Borrowers will not be charged an upfront fee.
Because of relief considerations, the PPP assumes that mst borrowers can have their loans forgiven (see below). For loans or the portions of borrowed amounts that are not forgiven, all borrowers will be charged an interest rate of 0.5%. No payments are due for six months. Interest will be charged after that timeframe.
How Can I Get My Loan Forgiven?
If restaurants use the money as directed, much of the loaned amount will be “forgiven”—lawyer-speak for waived. At least 75% of the amount must have been used to pay employees for the eight weeks following the provision of a loan.
Forgiveness also extends to payments during that period for rent; interest on mortgages; utilities; necessary transportation; and telephone and internet services.
If employees are furloughed or fired during the eight-week period, the forgiveness amount is reduced in accordance with a formula set by the SBA.
