Rising Above the Chaos

Consider: Paycheck Protection Program

As you may have heard, the banks are preparing to begin accepting Paycheck Protection Program (PPP) loan applications beginning on Friday April 3, 2020.  A statement by a senior SBA official indicated that the loans will be given on a first-come, first-served basis.

RESOURCES:

Disclaimer: As the situation rapidly changes, you will likely note conflicting information across these three data sources.

• Daily Noon Webinars A SBA expert is providing free semi-weekly webinars at noon. We strongly advise attending this webinar daily.
• A DRAFT PPP Loan Application has been posted (and updated on 4/3/20).  PPP Application V3
• An Information Sheet has been posted on the US Chamber of Commerce and the Department of  Treasury Website.  Note: the interest rate was since increased to 1%
• SBA Guidance on the loan process has been published in the form of an Interim Final Rule, Interim Final Rule – Additional Eligibility Criteria and PPP FAQ. Guidance on the forgiveness process is pending.
  Note: The PPP FAQ document continues to be updated, ensure to click “refresh” in your browser to ensure you are viewing the most recent copy
• Banks have been sending emails to business customers listing documents that potential borrowers should start to collect.  If you have not heard from your bank, please reach out to your local bank representative. Kindly forward us the list of documents your bank is requesting for PPP applications. We will compile a matrix for everyone’s reference.
• The Kane Firm Business Relief Summary will be updated daily as new information arises: comparative chart.

POINTS TO CONSIDER:

Disclaimer: The situation continues to rapidly evolve, and these points are subject to change.  

• Review Resources Provided Above. The above resources are The Kane Firm’s current primary resources regarding the SBA programs.
• Apply with your Current Bank.  The anticipation is that the fees the banks earn on these loans will not offset their costs.  We assume banks will only be servicing existing customers.
• Collect Important Supporting Documents.  PPP Checklist
• Keep it Simple.  The banks will be overloaded with applications. Ensure that your application is complete, and all information is provided upon submission. Keep the computation of your loan request amount as simple and complication free as possible.
• $100,000 Per Employee Limit. The SBA confirmed that this limit is on wages only.  State taxes and benefits can be added to the $100,000 wage limit per employee.
• LOAN Amount & FORGIVENESS Amount are DIFFERENT Calculations.

• • Loan Amount is calculated solely on payroll costs (less exclusions). Full Calculation Described Here.

Note: Independent contractors are not included in this calculation

• • Forgiveness Amount is equal to payroll costs, interest on mortgage, rent AND utilities during the 8-week period beginning on the day of loan origination.

Note 1: Currently, we anticipate a requirement that payroll costs must comprise of at least 75% of the forgiveness amount.

Note 2: We are awaiting guidance regarding the availability of forgiveness for self-rental.

• Maintaining Staff Levels.  Forgiveness of the loan is dependent on maintaining the average Full-Time Employees within 75% of prior levels.  In many ways, this statement creates more questions than it answers.The SBA confirmed on 4/8/20 that the forgiveness period for payroll costs begins the day of fund disbursement.  Lenders are required to fund the loan within 10 calendar days of loan approval.

If you are considering a reduction in force while you are awaiting loan approval, a conservative approach is to plan to restore your FTE payroll costs and headcount within 75% of 2019 levels prior to the loan origination date.  

• Partner/Owners.  At this time, we believe partner self-employment income and health care paid by the business, up to $100,000 can be included in the loan amount.
• Navigating as a Community. As we all experience a major influx of new and changing information, our business community is working to navigate through this together.  Typically, the federal government spends months rolling out lending programs, in this case months of work is being condensed into days.  We are grateful for our community members who continue to research and share information.