In these uncertain times surrounding the state of the country and the pandemic, employers and companies need every bit of help and certainty they can obtain. The Personal Protection Program (PPP) loan has the potential to be of tremendous benefit too many. I wanted to make sure the word got out about its existence and clarify some of the details you need to know. Hopefully this breaks it down in a very user friendly way.
What is a PPP?
Paycheck Protection Program Loan which is a Small Business Administration (SBA) loan that as of April 27th, 2020, was resumed to incentivize small businesses to keep employees on the payroll during the current Covid-19 Pandemic. Under certain circumstances, these loans will be forgiven (yes, that means you don’t have to pay them back).
How do you apply for the loan?
You do not apply through the SBA, you must apply through individual lenders. These lenders can be existing SBA lenders or any participating bank, credit union, or farm credit that is federally insured. You can find participating lenders by clicking the link below:https://www.sba.gov/paycheckprotection/find
Who may qualify?
Sole proprietors, independent contractors, & self-employed persons
Any small business that meets SBA size standards of 500 employees or greater or the standard size for that industry if more than 500 employees.
Any business that has less than 500 employees if they have their NAICS Code starts with 72 and they have multiple locations.
How is this loan forgiven?
Employees must be promptly rehired if they were laid off or let go, but keeping employees in place is fine too.
Salaries and wages cannot decline, if they are not kept at previous levels, the forgiveness is reduced.
The number of full-time employees should stay the same as before or there will be a reduction in forgiveness as well.
If employees declined the rehiring offer, you must have proof of a written offer that was given in good-faith and turned down by the former employee.
If employees are maintained on the company payroll for a minimum of 8 weeks and the money is used for the employee payroll, rent, mortgage interest (not principal), or utilities. 75% of the loan amount needs to have been used for the cost of payroll.
The loan forgiveness form needs to be submitted and considered.
This is where to apply for the loan forgiveness part of the program as well as more instructions on this:https://www.sba.gov/document/sba-form--paycheck-protection-program-loan-forgiveness-application
What are some of the other loan details?
No collateral or personal guarantees are required.
No fees will be charged by lenders or the government for these loans.
The business will have a 6 month deferral period in which no payments will have to be made.
The interest rate is 1%.
The maturity of this loan is 2 years.
There is some flexibility
Intuit, the company behind Quickbooks, Mint, & Turbotax also have a great tool to help with this program as well. You can eligibility, potential loan amount, & how much of the loan is potentially forgiven as well as additional Q&A through this link: https://aidassist.intuit.com/app/home#/home. See example below.
What documents and information will I need?
Payroll and payroll tax records with support documents including bank statements
Income/Expenses for Sole Proprietors
1099C if you are an independent contractor
Articles of Incorporation
Operating Agreement or By-laws
The name of any owners that have at least 20% interest in your company
IRS form 940 and 941
Verification of citizenship for employees and their salaries.
12 month Income Statement (Profit & Loss Statement on QBO).
If you have Quickbooks online, run your Payroll Detail & Summary reports to get the following:
Health insurance Premiums (include what the company pays for the group portion of the health plan)
Retirement Plan Funding
941 Tax Withholdings
You will need to track what you spend of the PPP funds and how you spend it. Here is how to track your PPP loan information:
Make sure you notate when you receive the funds.
Properly track your payroll and other eligible expenses in your accounting software into the proper accounts in the Chart of Account (i.e. Gross Salary expense, Employee Taxes payable, employer contribution of Health Insurance payable, etc).
Then, run a report from the date of loan receipt to present using the following instructions for Quickbooks Online:
If you need help getting books in order or other assistance, please feel free to reach out via email@example.com.