COVID-19 Stimulus Packages

Frequently Asked Questions

The information provided is based upon facts that were available at the time of publication and are subject to change. Better Accounting makes no warranties, express or implied, or representations as to the accuracy, completeness or timeliness of the information provided. Better Accounting cannot be held liable for any claims or damages that result from reliance on this information.

Paycheck Protection Program

The program provides cash-flow assistance through 100% federally guaranteed loans disbursed to employers who are maintaining their payroll during the COVID-19 emergency. Employers who maintain payroll are eligible for loan forgiveness. They are also eligible for up to 8 weeks of payroll forgiveness based on employee retention and salary levels.

There are no SBA fees and six to twelve months of deferrals. Small businesses and other eligible entities will be able to apply if they had economic injury as a result of the COVID-19 emergency between February 15, 2020 and June 30, 2020. The program is retroactive to February 15, 2020 to incentivize businesses to bring employees who have already been laid off back onto the payroll.

Any eligible businesses and entities must have been in operation on February 15, 2020.

Small businesses, 501(c)(3) nonprofits, 501(c)(19) veterans organization, and tribal business concerns that has fewer than 500 employees or the applicable size standard for number of employees set out by the North American Industry Classification System (NAICS) as provided by the SBA.

Individuals who operate a sole proprietorship or who operate as an independent contractor.

Eligible self-employed individuals.

Any business that employs not more than 500 employees per physical location of the business, and that is assigned a North American Industry Classification System code beginning with 72, for which the affiliation rules are waived.

Affiliation rules are also waived for any business concern operating as a franchise that is assigned a franchise identifier code by the SBA, and company that receives funding through a Small Business Investment Company.

The PPP funding can be used for compensation—salary, wage, commission, payment of cash tip or equivalent. It can also be used for payment of vacation, parental/family, medical or sick leave.

75% of the PPP loan needs to be used for payroll cost. the other 25% can go to the other approved costs (mortgage interest, rent, utilities, other interest accrued from debt obligation.

The loan can also be used to pay for healthcare benefits (including insurance premiums), payment of retirement benefits, and payment of state or local tax assessed on employee wage compensation.

  • Payroll costs
  • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
  • Employee salaries, commissions, or similar compensations
  • Payments of interest of any mortgage obligations (which shall not include any prepayment of or payment of principal on a mortgage obligation)
  • Rent (including rent under a lease agreement)
  • Utilities
  • Interest on any other debt obligation that were incurred before the covered period

To apply for a PPP loan, you’ll need:

  • 2019 IRS Quarterly 940, 941 or 944 payroll tax reports
  • Last 12 months of Payroll Reports beginning with your last payroll date and going     backwards 12 months
  • 1099’s for 2019 for independent contractors that would otherwise be an employee of your business
  • Documentation showing total of all health insurance premiums paid by the company under a group health plan, including employees and company owners
  • Document the sum of all retirement plan funding that was paid by the company
  • 401K plans, Simple IRA, SEP IRA’s
  • Do not include retirement contributions from employee paycheck deferrals

You can apply for both. However…

If you ultimately receive a PPP loan or refinance an EIDL into a PPP loan, any advance amount received under the Emergency Economic Injury Grant Program would be subtracted from the amount forgiven in the PPP. However, you cannot use your EIDL for the same purpose as your PPP loan. For example, if you use your EIDL to cover payroll for certain workers in April, you cannot use PPP for payroll for those same workers in April, although you could use it for payroll in March or for different workers in April.

https://eig.org/wp-content/uploads/2020/03/Paycheck-Protection-Program-Overview.pdf

The PPP covered loan period is retroactive to February 15th, 2020 through June 30th, 2020.

https://eig.org/wp-content/uploads/2020/03/Paycheck-Protection-Program-Overview.pdf

  • All non-profits classified as 501(c)(3) with 500 employees or fewer.
  • If non-profit has more than 500 employees, verify that it meets SBA’s size standards at https://www.sba.gov/size-standards/ .
  • Non-profits will additionally need the 6-digit North American Industry Classification code to apply.
  • Affiliation rules become important when the SBA is deciding whether a business’s affiliations prevent them from being considered “small”.
  • Generally, affiliation exists when one business/third party controls or has the power to control another.
  • The SBA website provides this resource to determine eligibility in regards to affiliations: https://www.sba.gov/document/support–affiliation-rules-paycheck-protection-program .
  • The maximum loan amount is the lesser of:
  • 2.5X the average monthly payroll costs during the 1-year period before the date on which the loan is made, or…
  • $10 million
  • For new businesses, the measurement period would be from January 1st to February 29th, 2020.
  • The legislation temporarily increases the maximum amount for an SBA Express loan from $350,000 to $1 million through December 31st, 2020.
  • To qualify for an SBA express loan, the business must:
  • Operate for profit
  • Engage in operations within the USA
  • Be in operation for at least 2 years
  • Qualify as a small business per SBA size standards
  • Be able to show a need for financing
  • Have financed the business through other means
  • Show that the funds will be used for sound business purposes
  • Not have delinquencies on previous debts to the government
  • Eligible for Payroll

    • Compensation
    • Payment for vacation, parental, family, medical, or sick leave
    • Allowance for dismissal or separation
    • Group health care benefits, including insurance premiums
    • Any retirement benefit
    • Statement of state or local tax assessed on employee compensation

    NOT Eligible for Payroll

    • Employee/owner compensation over $100,000
    • Taxes imposed or withheld under chapters 21, 22, and 24 of IRS code
    • Compensation of employees whose place of residence is outside of the US
    • Qualified sick and family leave for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act: https://www.congress.gov/bill/116th-congress/house-bill/6201
  • The maximum term is 10 years.
  • There are zero loan fees and zero prepayment fees.
  • Additionally, the SBA will establish application fee caps for lenders that charge.

Interest rates:
  • 1% for loans of not more than $350,000
  • 0.50% for loans of more than $350,000 and less than $2 million
  • 0.25% percent for loans of at least $2 million.

You must apply through your lender for forgiveness on your loan.

You must include:

  • Documentation verifying the number of employees on payroll and their pay rates, including IRS payroll tax filings and state income, payroll, and unemployment filings.
  • Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities.
  • Certification from a representative of your organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with PPP’s guidelines.
Forgiveness on a covered loan is equal to the sum of the following payroll costs incurred during the covered 8-week period compared to the previous year or time period, proportionate to maintaining employees and wages (excluding compensation over $100,000).
  • This includes payroll costs, plus any payment of interest on mortgage obligation (not prepayment or payment of principal), plus any payment of any covered rent obligation, plus any covered utility payment.
  • As we understand it, compensation is forgiven up to $100,000 per employee.
  • For example, if an employee’s salary is $120,000, the amount not forgiven would be $20,000.

You may include payments made to 1099 contractors when calculating payroll costs, but any amount used to pay 1099 contractors from the loan will not be forgiven.

Any loan amount that is not forgiven at the end of one year is carried forward as an ongoing loan with max terms of 10 years, at a max 4% interest.

Principal and interest will continue to be deferred for a total of 6 months to a year after disbursement of the loan.

No. An entity is limited to one PPP loan.

Each loan will be registered under a taxpayer identification number with the SBA to prevent disbursement of multiple loans to the same entity.

All current SBA 7(a) lenders are authorized to disburse PPP loans.

The Department of Treasury will be in charge of authorizing new lenders, including non-bank lenders, to help meet the needs of small business owners.

To learn about SBA 7(a) lenders, visit the SBA’s site: https://www.sba.gov/partners/lenders/7a-loan-program/types-7a-loans

SBA Economic Injury Disaster Loans

Employee Benefits