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Paycheck Protection Program (PPP)
Under CARES Act

 

The Coronavirus, Aid, Relief and Economic Security  (CARES)Act created the Paycheck Protection Program (PPP). Signed into law on March 27, 2020, the SBA announced guidance on March 31st. Although there are still expected changes, the information below is as we understand the program today.  We will continue to provide updates as they become available.  In the sections below you will find answers to some of the most commonly asked questions about the program.

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PAYCHECK PROTECTION PROGRAM

After receiving your application, you will receive a secure upload link to submit a limited number of documents. Our lenders will review your financing request and provide funding options.


Payroll Protection Program

The Coronavirus pandemic has devastated America’s small businesses. The US Government is responding with a new SBA Loan Program, the Paycheck Protection Program, which includes powerful benefits for franchisees and other small businesses.  The program will feature loans up to $10,000,000 at historically low interest rates along with the potential to have the portion of the loan attributable to payroll costs from March 1 – June 30, 2020 forgiven.

Who is Eligible?

All businesses – including nonprofits, veterans’ organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – with 500 or fewer employees can apply. Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries.

For this program, the SBA’s affiliation standards are waived for small businesses (1) in the hotel and food services industries; or (2) that are franchises in the SBA’s Franchise Directory; or (3) that receive financial assistance from small business investment companies licensed by the SBA. Additional guidance may be released as appropriate.

What’s needed to determine eligibility?

Your business must be operational as of February 15, 2020, and had employees for whom you paid salaries and payroll taxes, or that your business made payments to an independent contractor.

How do I calculate the total loan amount?

Average monthly payroll costs, excluding compensation above $100,000 in wages (based on prior 12 months) X 2.5. That amount is subject to a $10 million cap.

What is the Maximum Loan Amount?

Loans are available for the lesser of $10 million or the average monthly payroll costs for the past trailing 12 months x 2.5. Average monthly payroll costs are calculated based on the one-year period prior to the loan disbursal date except for seasonal employers and employers not in business between February 15, 2019 and July 30, 2019.

In the case of seasonal employers, the employer may choose to calculate the average monthly payroll costs based on the 12-week period starting February 15, 2019 or the period starting March 1, 2019 through June 30, 2019.

In the case of new employers not in business between February 15, 2019 and July 30, 2019, the average monthly payroll costs is calculated based on the period beginning January 1, 2020 through February 29, 2020.

What counts as “payroll costs?”

  • Salaries (up to $100,000 for any employee), wages, commissions or similar compensation, cash tips or equivalent, paid vacations, paid sick, parental and family medical leave
  • Allowance for dismissal or separation
  • Group health costs including insurance premiums
  • Retirement benefits
  • State and local payroll taxes
  • Payments of any compensation to or income of a sole proprietor or independent contractor that is wage, commission, income, net earnings from self-employment in an amount that is not more than $100,000 on an annualized basis (prorated for the covered period)

Will this loan help with working capital?

Yes. You should use the proceeds from these loans on your:

  • Payroll costs, including benefits;
  • Interest on mortgage obligations, incurred before February 15, 2020;
  • Rent, under lease agreements in force before February 15, 2020; and
  • Utilities, for which service began before February 15, 2020.
  • Note: SBA Disaster loans made between 1/31/20 and the date the Paycheck Protection Loan (PPP) is available may be refinanced with a PPP loan.

When will I get access to funds?

Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans.
Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans.

If you have already applied, you will receive notification when information is needed to complete the process.  If you haven't yet applied, fill out your form today.

Will I have to pay back my loan?

You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.

You will also owe money if you do not maintain your staff and payroll.

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

Are there any fees?

There are no SBA fees; Bank fees (including guarantee fee); or fees paid to Benetrends or BoeFly.

Is collateral or a personal guarantee required?

No personal guarantee; no collateral requirements.

What is the interest rate?

As of April 3, 2020: 1% fixed rate for a 2-year term. Principal or interest payments on the loan will be deferred for 6-months and up to 12-months.

What documents will I need to complete my application?

BoeFly, in partnership with Benetrends, has designed a low-doc application. You will need to provide support for your payroll that drives your loan amount. The expected documents include quarterly payroll reports and cancelled checks for 1099 contractors. Your secure BoeFly portal will let you know if there is any further documentation needed.

Can I take out a PPP and an EIDL?

You can take out an EIDL loan if it is for purposes other than what’s covered by the CARES loan. Given the unique forgiveness aspect of the PPP, borrowers are advised to take endeavor to secure a PPP loan. Borrowers with an EIDL Loan unrelated to COVID-19 are still eligible.

How Does the PPP and a traditional SBA 7(a) Loan Differ?

Paycheck Protection Loans are being overseen by SBA but that is where the similarities stop. CARE Loans can be forgiven, have more borrower-friendly terms like no personal guarantee, are less cumbersome and restrictive.

Is There Loan Forgiveness?

You will need to submit an application for forgiveness to your lender, and provide documentation that verifies the number of full-time equivalent employees and pay rates for the 8-week period commencing from when the loan was made. Documentation will include:

  • Payroll costs
  • Salaries
  • Benefits
  • Rent
  • Utilities
  • Mortgage interest

The forgiveness amount is subject to reduction if there is a workforce reduction or a reduction in the salary or wages of an employee.

Reductions in workforce, salaries and wages that occur from February 15, 2020 to April 26, 2020 will be disregarded for purposes of reducing the forgiveness amount so long as the reductions are eliminated by June 30, 2020.

Borrowers must apply for forgiveness with the lender servicing the loan. Lenders have 60 days to review and make a determination. Any portion of the loan that is forgiven will be excluded from gross income.

Paycheck Protection Program Benefits

>> Speed

Paycheck Protection Loans can be originated by the 1,000+ banks authorized to make SBA loans, in contrast to SBA’s traditional disaster relief program (EIDL) in which SBA is the sole lender.

>> Forgiveness

The loan proceeds used for payroll and other defined expenses will be forgiven if you maintain your workforce. The full loan can be forgiven if you maintain some or all of your payroll costs.

>> Qualification

If you have under 500 employees, were in business on February 15, 2020 (even if closed for the virus) and had payroll expenses, you qualify.

>> Deferments

Loans have no payments for 6 months or as long as 12 months, so you get back on your feet.

>> Simplified Process

Use this short-form application with limited required documents to get the process started faster.

>> No Personal Guarantee

Unlike typical loans, you do not need to provide a personal guarantee or collateral requirements.


Ready to Get Started?


SBA's Economic Injury Disaster Loans (EIDL)

This provision expanded eligibility for access to SBA’s Economic Injury Disaster Loans (EIDLs). The SBA shall waive any personal guarantee on advances and loans below $200,000 on these loans made in response to COVID-19 before December 31, 2020.

Businesses, sole proprietorships, independent contractors, non-profits, cooperatives or ESOPs with fewer than 500 employees are eligible to apply. It covers providing paid sick leave to employees, maintaining payroll, meeting increased costs to obtain materials, making, rent or mortgage payments, and repaying obligations that cannot be met due to revenue losses.
For EIDL loans, you must apply directly through the SBA: Visit disasterloan.sba.gov/ela.


SBA's Loan Deferrals

It is suggested that any small business owner with an existing SBA loan request a deferral on their payments for at least 3 months and for as much as 6 months. For a sample letter you can use to email your lender to request these deferrals, please click here.

Additional Resources

 

Download a copy of The Small Business Guide and Checklist to the CARES Act
This Guide will Cover the Following Topics:
+ What types of businesses and entities are eligible for a PPP loan?
+ What lenders are looking for?
+ Will this loan be forgiven?
+ How is the loan size determined?
+ What costs are eligible for payroll?

 



As an additional source of information, here is a link to the International Franchise Association's CARES Act Resource Hub

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