The Coronavirus is out and we are all adopting to zoom calls and helping teach our kids school. The government has come out with lots of programs to help. To us the programs that give you money seem like the best so we are going to tell you how to get money for your business to pay for payroll.
For most businesses it seems like the Payroll Protection Program ("PPP") will be the best option as you get free cash (i.e. you get a loan and it should be forgiven)
To be eligible you need to have full time employees. If you don’t then you will have to find a different option. There are some exceptions like having over 500 employees or employees that make over $100K per year but in general this is how you should calculate your average monthly payroll.
If you need help then please schedule a call here. Or you can email paul@financepals.com.
We tried to keep it simple based on our clients above but wanted to provide more info. There are lots of different scenarios but its best to talk with a CPA or lawyer if you need help. We also found that the banks are pretty knowledgeable.
Who Qualifies?
You have to have payroll costs for employees that were paid prior to February 2020 (at this time 1099 contractors are not included but that may change). A small business with fewer than 500 employees that was in business on or before February 15, 2020. This can be an S Corp, C corp, LLC, sole proprietorship or independent contractor. It also includes certain nonprofits, tribal groups and veteran groups. When obtaining the PPP loan, you need to certify that your business has been economically affected or that economic uncertainty make the loan necessary.
Eligible payroll expenses for calculating PPP loan amounts include:
However, the PPP does not count the following expenses when calculating the total PPP reimbursement amount:
Once an eligible business receives the loan, they may use it for the following:
Notably, the SBA will fully forgive all loans under the PPP provided three requirements are met:
How Do I Get This Loan Forgiven?
This is the critical question. The loan forgiveness provision is the best part. You are eligible for loan forgiveness for the amounts you spend over the next eight weeks after receiving the loan on certain qualifying expenses. The qualifying expenses of the business over the eight-week period includes payroll costs, rent, interest on mortgage debt and utilities.
If the number of full-time employees is reduced over this time period or if your payroll costs are reduced 25 percent or more, then the amount of the loan eligible for forgiveness will be reduced.
The bank who granted the loan is who will determine the loan forgiveness amount based on the criteria above. The business will request forgiveness of the loan with evidence to the bank, and the bank will have 60 days to approve or deny the forgiveness.
When Do I Have to Pay It Back?
Loan payments are deferred for the first six months. The loan term specified by the treasury guidance is two years. There is no pre-payment penalty though, so you can repay or have the loan forgiven earlier.
Do I Have to Put Up Collateral or Sign a Personal Guarantee?
No 🙂