The Paycheck Protection Program (“PPP”) authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis.
Below are also a comprehensive set of guides for use in obtaining 7(a) forgiveness loans. Also, below is some is some “plain English” guidance and talking points on the 7(a) loans that have the forgiveness component which will be useful you. The attachments contain tools to help you compile necessary documents and information.
We advise that you jump on this as process soon as possible can because the SBA is expecting to be overwhelmed and the process may take longer than usual.
Businesses can apply for either the SBA Disaster Loan or the Paycheck Protection Program (PPP) but not both.
In order to prepare for the PPP loan:
- Gather detailed payroll records for the past 12 months. Calculate the average monthly payroll costs for that period and multiply by 2.5x to determine the approximate maximum PPP loan amount. If you want to attempt to have the full principal balance of the loan forgiven, make sure to subtract the portion of payroll cost that exceed $100,000 on a prorated basis over the period for employees that make over $100,000 annually because that will count toward the payroll cost for the purposes of determining loan forgiveness.
- Determine how many full-time equivalent employees were on your payroll from 2/15/2019 to 6/30/2019 and all your payroll costs (see definition above) during that period. The average number of FTE employees is determined by calculating the average number of FTE employees for each pay period falling within a month. It appears that in order to maximize loan forgiveness, after you obtain the loan clients will need to keep FTE employee numbers equal to or above 2/15/2019 to 6/30/2019 numbers. Additionally payroll costs cannot decrease by more than 25% compared to 2/15/2019 to 6/30/2019. This remains a bit confusing but more guidance should be available soon.
- Create a budget for all expenses that commenced 2/15/2020 and run until 6/30/2020. Be as detailed as possible and include all operating costs (Payroll, Insurance, Utilities, Rent/Mortgage Interest, etc). Consideration should be given to the amount of your payroll expense that is not eligible for forgiveness. Any amount borrowed in excess of the amount eligible for forgiveness will need to be repaid.
*Each bank might have different requirements, so please check with the bank you intend to use.