29 Mar COVID-19 Paycheck Protection Loan Program (PPP)
By: Barry E. Haimo, Esq.
March 29, 2020
Legislation is being proposed and hopefully signed into law to assist businesses maintain their employee workforce by providing PPP loans. PPP loans will be made by lenders who are currently approved as 7(a) lenders or who are approved by the SBA and the Treasury Department to become PPP lenders. The major highlights of these loans are as follows:
* Eligibility: 500 or less employees (some exceptions for certain NASIC codes)
* Loan amount: Lesser of 250% of monthly payroll or $10 million
* Term: 10 years
* Collateral / Personal Guarantees: Waived
* Fees: None
* Interest: Maximum annual rate of 4%
* Use of proceeds: Includes payroll, sick and medical leave, insurance premiums, mortgage interest, rent and utilities
* Loan forgiveness: Forgiven up to 100%, based on the amount spent by the borrower for the 8-week period after the loan origination date on payroll, interest payments on mortgage, lease payments, and utility. However, this amount is reduced by the amount of payroll reduced due to layoffs. Cancelled loan amounts will not be taxable income.
For those employers who do not benefit from a PPP forgivable loan, there is an employee retention payroll credit. If you are eligible (depending on whether you have more or less than 100 full-time employees); if you have less than 100, all wages qualify for the credit (whether you were open or closed due to COVID-19). The credit is on payroll taxes based on wages up to $10,000 per eligible employee for wages paid from March 13 through December 31, 2020.
There is also a payroll tax deferral which frees up an employer’s cash flow (who retains workers during this pandemic) by allowing the employer to defer payment of the associated payroll taxes until December 31, 2021 (50%) and 2022 (50%); subject to certain restrictions and parameters.
The final legislation may be different, and we will update this communication once final legislation is made available to the public. If you need assistance with preparing the information, introductions to SBA lenders, or submitting the information, please contact us. We are here to help.
Stay tuned for more.
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