The SBA has re-opened the Paycheck Protection Program (PPP) and banks are accepting applications from borrowers. The Paycheck Protection Program allows employers to receive funds to pay payroll, rent and other expenditures and, if used for those expenditures, apply to have those funds forgiven after the end of the loan period.
To qualify for this program, borrowers must have less than 300 employees, be able to demonstrate a 25% or greater revenue reduction for at least one quarter of 2020 compared to the same quarter in 2019 or an annual 25% or greater revenue reduction in 2020 vs. 2019.
The maximum loan amount is calculated at 2.5x average monthly payroll costs of the borrower. If a borrower is in the Hospitality industry, the maximum loan amount is 3.5x the average monthly payroll costs.
To apply for a PPP Loan, you must contact your bank or a participating financial institution to find out how and when you can submit your application. In addition to filling out the application most banks are requesting the following information:
- Summary of your payroll costs for 2019. If your payroll in 2020 has increased, you may submit tax documents and bank statements showing the increase of payroll.
- For loans under $150,000 you will need to provide the revenue for the calendar quarter in 2020 and 2019 where revenue decreased by at least 25%. For loans greater than $150,000 you will need to provide financial statements and/or bank statements.
To qualify for forgiveness for PPP Loans, the borrower will need to certify or demonstrate that loan proceeds were spent on payroll, rent, utilities, mortgage interest, worker protection from COVID-19, uninsured property damage and certain property costs. These funds must be used within an 8- or 24-week period (this choice is up to the borrower). Sixty percent (60%) of the funds received must be used for payroll costs. Forgiveness applications will be submitted to the same bank or financial institution that submitted the loan. Unlike other loans when they are forgiven, PPP loan forgiveness is tax-free.
There are two important notes to keep in mind about the PPP program. First, each bank is working independently of each other and some banks may require different information from others. Second, and most importantly, the terms of this program are subject to change as the SBA and banks get a better understanding of the current needs of business owners.
If you have any questions about the PPP Loan Program or need assistance in putting together your request for a loan, please contact FSB&W for assistance.