Recommended ResourcesThe terms of this program have been fluid and conflicting information abounds. A participating lender we spoke to has recommended the following link – https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses – to the US Treasury as the most up-to-date source of information and a great resource. Currently the applications are for small businesses with a separate application window opening on April 10, 2020 for independent contractors and self-employed individuals. The US Treasury has provided a great information guide for potential participants of the PPP program at https://home.treasury.gov/system/files/136/PPP–Fact-Sheet.pdf. This document can answer questions on the application process, approved uses for the funds, what is forgivable, and the loan terms as of today. This document and the US Treasury website should be your primary sources of information, in addition to your lender.
Concerns of FraudPlease be aware that you should only file with an approved lender that you have a relationship with or have contacted yourself. The SBA or US Treasury will not be contacting you to seek participation. There is concern that bad actors may use this opportunity to impersonate lenders or government officials to gain access to your information for the purpose of fraudulently filing for a loan or for other illegal means. The below information is current as of Friday, April 3, 2020, please rely on your lender to confirm any updates that may have occurred.
Participation ProcedureParticipation has three stages: Application, Use of funds and loan forgiveness or repayment.
ApplicationThe application process is a streamlined application which can be found at https://home.treasury.gov/system/files/136/PPP-Lender-Application-Form-Fillable.pdf. Applying involves the following steps:
- Verify if your small business qualifies using the SBA and NAICS codes, found by linking to https://www.ecfr.gov/cgi-bin/text-idx?SID=0ff5f0839abff4eec707b4478ed733c6&mc=true&node=pt13.1.121&rgn=div5.
- Calculate your loan amount for the application. Total your last 12 months of payroll for US based employees (cap any employee’s compensation at $100,000) and divide by 12. Then multiply this amount by 2.5 to figure out the maximum loan amount. Verify with your lender that this calculation is the approved method.
- Provide your lender the completed application and any financial documents used in the calculation of your payroll. Payroll verification documentation may vary depending on each lender.
- Receive approval and loan funding.
Acceptable Use of the FundsThe main purpose of the program is to encourage businesses to retain or rehire their employees. Therefore, the loan amount calculation is based on a historical payroll calculation. The funds are intended to be used for payroll expenses and related business expenses for the 8-week period following receipt of the loan. Any unapproved uses of the loan proceeds may impact what portion of the loan proceeds are forgiven. The only costs incurred during this period is the 1% interest rate stated on the application.
Forgiveness/RepaymentFor repayment of the loan proceeds to be forgiven, the borrower must reapply to the lender after the 8-week period. To qualify for forgiveness, the borrower will need to prove that at least 75% of the proceeds were applied to payroll expenses. If this threshold is reached, other approved expenses may be forgiven as well. The borrower must provide documentation to the lender for review prior to the forgiveness of the funds. The forgiveness calculation also considers other factors such as the borrower’s 2019 and 2020 employee counts and payroll amounts. Please confirm with your lender for the necessary documentation requirements. Any funds not qualifying for forgiveness can be either repaid or restructured with the lender into a loan with an amortization up to 10 years and an interest rate of 4%. There is no prepayment penalty associated with this new loan. We would like to encourage you to investigate this opportunity and other opportunities the government has available under the CARES Act. If this program is appealing to you, we encourage you to apply as soon as possible. While the window for application extends through June 30, 2020, there is a cap on the available funds which may be exhausted in short order. If you would like to discuss this or any IP related concerns you have, please contact us. We are always available to provide advice and counsel for your needs.
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