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Payroll Protection Program (PPP)


Summary of Paycheck Protection Program

Russell E Phillips, Jr., CPA, CVA, MAFF

March 29, 2020



Payroll Protection Program (PPP) – Section 1102

-          Small Business Administration 7a Loan Program has been amended to expand the available lenders

-          These loans are applied for and administered by local and community banks

-          Covered period of the loans 02/15/20 – 06/30/20

-          Eligible recipient

1.       Businesses with less than 500 employees and businesses assigned the NAICS code beginning with 72 that have less than 500 employees per location

2.       Self-employed individuals – SBA may request Form 1099s, income and expenses from the sole proprietor

3.       Insured credit unions

4.       Non-profit organizations – 501(c)3

-          Definition of Payroll Costs

1.       Salaries, wages and commission payments to employees

2.       Payment of cash or equivalent

3.       Payment for vacation, parental, family, medical or sick leave

4.       Allowance for dismissal or separation

5.       Payment for required group health care benefits and premiums

6.       Payment of any retirement benefit

7.       Payments to self-employed individuals not exceeding $100,000 in one year

8.       Payments to an employee in excess of $100,000 in one year do not qualify

-          Calculation of maximum loan

1.       Is calculated by multiplying:

a.       The total average of monthly payroll costs incurred during the one year period before the date on which the loan is made (an exception for seasonal businesses, a different calculation) by 2.5

b.       Plus the outstanding amount of a loan made under subsection (b)(2) (Economic Injury Disaster Loan) that was made during the period 01/31/20 and the date the covered loan is made available to be refinanced under the covered loan

c.       Or a maximum of $10,000,000

d.       Example, $500,000 average of monthly qualifying payroll costs times 2.5 equals $1,250,000 – your maximum loan amount

-          Allowable uses of Covered Loans

1.       Payroll costs

2.       Cost related to healthcare and related benefits

3.       Salaries, commission and similar compensation

4.       Payment of interest on any mortgage obligation

5.       Rent under a lease agreement

6.       Utilities

7.       Interest on any debt incurred before the covered period

-          Considerations by the lender for making a Covered Loan

1.       Was in operations on 02/15/20

2.       Had employees who were paid salaries and payroll taxes, or

3.       An independent contractor paid as reported on Form 1099-MISC

-          SBA PPP 7a loan will be non-recourse

-          Borrower requirements/Certifications

1.       The uncertainty of the current economic conditions makes the loan request necessary to continue current operations

2.        Acknowledging the funds will be used to retain workers and maintain payroll, make mortgage payments, pay utilities, and leases

3.       The eligible recipient does not have another loan application for the same purpose and duplicate amount received or another Covered Loan

4.       During the period 02/15/20 through 12/31/20 has not received a duplicate amounts under a Covered Loan

-          Current SBA PPP 7a waivers

1.       No fees

2.       Credit elsewhere waiver

3.       No personal guarantee

-          PPP SBA 7a Loan Forgiveness – Section 1106

1.       The covered period for which expenses can be forgiven extends from 02/15/20 and 06/30/20

2.       The term “covered period” is defined as an eight week period beginning on the date of the origination of the Covered Loan.

3.       If you retain all your employees, forgiveness of the loan will be equal to the amount spent on payroll costs, mortgage interest, rent and utility payments incurred during the 8 week period.

4.       Any reduction in the number of the employees or wages paid can reduce the amount of loan forgiven.

5.       The amount of loan not forgiven can be amortized over a period of years not to exceed 10 years

-          Applicants can apply for both the SBA Economic Injury Disaster Loans and the Paycheck Protection Program loan



This summary is my initial understanding of the SBA 7a Paycheck Protection Program loan and is subject to change as more guidance becomes available.






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