An initial legislative response for the Covid-19 pandemic was found in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and the Paycheck Protection Program (PPP). This was passed to provide emergency relief for certain businesses, nonprofit organizations and independent contractors disrupted by the current COVID-19 situation.
?The PPP allowed financial institutions to provide federally-backed, potentially forgivable loans to eligible businesses that met certain criteria. As was reported, the initial $350+ Billion in the PPP was depleted quickly.
Congress recently passed the Paycheck Protection Program and Health Care Enhancement Act, and it was signed into law by the President on April 24, providing an additional $320 Billion in funding for the PPP.
The U.S. Small Business Administration (SBA) announced it will resume accepting PPP applications from participating lenders on Monday, April 27, 2020 at 10:30am EDT, but many lenders will begin working on applications they've already received.
?The bill expands farmer and rancher eligibility for the SBA Economic Injury Disaster Loan (EIDL) program, provides additional funding for the Paycheck Protection Program (PPP) and includes necessary funding for hospitals and rural health clinics. The SBA will resume processing EIDL Loan and Advance applications that are already in the queue on a first-come, first-served basis.
According to Farm Bureau Bank, in order to take advantage of the loans, a business must be impacted by COVID-19 between February 15, 2020 and June 30, 2020. The PPP contains the following additional eligibility requirements and parameters:
- Businesses with less than 500 employees and sole proprietors are eligible
- Loan amount is determined based primarily on documented payroll-related costs, not to exceed $10 million
- All loans are 2-years with 1.0% fixed interest rate
- No payments for the first six months followed by 18 monthly principal and interest payments
- If workforce and payroll is maintained, SBA will forgive the portion of the loan proceeds used to cover the first 8 weeks of payroll (must be 75% of forgiven amount) and interest on mortgages, rent and utilities (remaining 25% of forgivable amount).
Businesses can borrow a maximum of 2.5 times their average monthly payroll over the prior 12 months, or for seasonal businesses, it will be for the payroll period between February 15, 2019 and June 30, 2019 or March 1, 2019 and June 30, 2019 and is the decision of the borrower. Payroll loans may not exceed $10 million. Payroll expenses can include the following:
- Salaries, wages, commissions or tips (capped at $100,000 on an annualized basis for each employee)
- Employee benefits including costs for vacation, parental, family, medical, sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit
- State and local taxes assessed on compensation
- For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee
Who Can Apply?
?According to Western AgCredit, in order to apply for the PPP program, the following information is required:
- Completed SBA PPP Loan Application Click Here.
- Completed PPP Loan Worksheet: Click Here. This worksheet will help you determine the amount of money you qualify for and what portion of those funds are eligible to be forgiven.
- Payroll documentation which may include:
- IRS Form 941 or 943
- IRS Form W-3 (summary of all W-2’s)
- Health insurance premium statement, including vision and dental insurance
- Retirement plan employer contribution report
- Payroll processor reports
- Self-employed – 2019 IRS Tax Returns with Schedule SE