Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
*Update 4/16/2020: The original appropriation of $349B has been utilized so no more funding is available at this time. The Senate will reconvene on Monday, April 20 to discuss additional funding.
Beware, this is not just the base wage amount you pay to employees. You can include many other items. Per the bill, you can include:
(viii) the term ‘payroll costs’—
“(aa) the sum of payments of any compensation with respect to employees that is a—
“(AA) salary, wage, commission, or similar compensation;
“(BB) payment of cash tip or equivalent;
“(CC) payment for vacation, parental, family, medical, or sick leave;
“(DD) allowance for dismissal or separation;
“(EE) payment required for the provisions of group health care benefits, including insurance premiums;
“(FF) payment of any retirement benefit; or
“(GG) payment of State or local tax assessed on the compensation of employees; and
“(bb) the sum of payments of any compensation to or income of a sole proprietor or independent contractor** that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in 1 year, as prorated for the covered period;
** Further clarification from the SBA indicates that you cannot use payments made to independent contractors in the calculation for payroll costs. You can only include payments received as a source of income that are subject to self-employment taxes in the calculation.
So, don’t forget to include health insurance benefits, employer retirement contributions, state unemployment taxes and any local taxes that the employer must pay based on compensation, payments to independent contractors (including workcampers … which is a whole different topic since they should be W2 employees).
Once you get the loan, payments made for the following items can be part of the amount requested to be forgiven:
“(1) Payroll costs.
(2) Any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation).
(3) Any payment on any covered rent obligation.
(4) Any covered utility payment.”
The forgiveness is based on a percentage of the retained full-time equivalent workers. More details are needed to provide a full calculation here, but you don’t need to worry about that part for several months and we expect further details to be provided by then. For now, please focus your efforts on getting the loan and then we’ll focus later on the forgiveness details.
The SBA released Interim Final Regs. on the PPP Loan program on April 3, 2020. It included several contradictory provisions which are leading to confusion with the banks and lenders who are accepting applications. First, it should be noted that the “Interim Final Regs” document from the SBA is open to comment and does not become a final document for 30 days.