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Paycheck Protection Program Loans Update April 8, 2020

Paycheck Protection Program Loans Update - April 8, 2020

  • The borrower is responsible for providing an accurate calculation of payroll costs and the borrower must attest to the accuracy of those calculations.
  • Small businesses can be eligible borrowers even if they have more than 500 employees, as long as they qualify for the SBA employee-based or revenue-based size standard corresponding to its primary industry.
  • Additionally, businesses can qualify for the PPP if they meet the SBA’s “alternative size standard:” (1) $15 million net worth of the business; and (2) average net income after Federal income taxes for the past two full fiscal years is not more than $5 million.
  • A business is still eligible for a PPP loan if the business has 500 or fewer employees or the business meets the SBA-employee based size standards for its industry.
  • It is the responsibility of the borrower to determine which entities are its affiliates and calculate employee headcount.
  • If a minority shareholder in a business waives or relinquishes any existing right to prevent a quorum or otherwise block action by the board or shareholders, they are no longer an affiliate of the business.
  • The exclusion of compensation in excess of $100k only applies to cash compensation and not to non-cash benefits including retirement plans, health care coverage and payment of state and local taxes assessed on compensation.
  • PPP loans cover payroll costs, including for vacation, parental, family and sick leave. It does not cover severance.
  • In evaluating a borrower’s eligibility, a lender may consider whether a seasonal borrower was in operation on February 15, 2020 or for an 8-week period between February 15, 2019 and June 30, 2019.
  • Payroll documentation provided by PEOs or similar payroll providers indicating the amount of wages and payroll taxes reported to the IRS will be considered acceptable loan payroll documentation.
  • Only an authorized representative of the business seeking a loan may sign on behalf of the business.
  • Businesses are ineligible if an owner of 20% or more of the equity of the applicant is presently incarcerated, on probation, on parole, subject to an indictment or any other formal criminal charges or has been convicted of any felony within the last 5 years.
  • Borrowers can calculate their aggregate payroll costs using data from the previous 12 months or from the 2019 calendar year. For seasonal businesses, applicant may use average monthly payroll from February 15, 2019, or March 1, 2019 and June 30, 2019.

 

  • Any amounts paid to an independent contractors or sole proprietors should be excluded from the eligible borrower’s payroll costs.

 

  • Payroll costs are not reduced by taxes imposed on employees and required to be withheld by the employer and do not include the employer’s share of payroll taxes.

 

  • Borrowers who have previously submitted loan applications which have not yet been processed may revise their applications based on these clarifications.