Paycheck Protection Program Update

April 23, 2020

Paycheck Protection Program Update

On Tuesday, the Senate approved a second round of funding for the Small Business Administration’s Paycheck Protection Program (PPP). The PPP was implemented in early April and provided small businesses with loans to pay eight weeks of salary, benefits, and other businesses-related cost of employment. The loans are eligible for forgiveness if the small business restores its full-time employment and salary levels by June 30. 

The program proved successful and dispersed its entire $350 billion budget in just under three weeks. This put the program at a standstill as federal law prohibits the SBA to accept any new PPP applications after funding has been depleted.

As we wait for the House of Representatives to approve the legislation and for President Trump’s signature, we encourage our industry’s business owners, who have not yet applied or missed the initial loan funding, to begin preparing for the next round of applications by following the tips below.

Tips for Navigating the PPP Application

For those small businesses still interested in applying for PPP funding, you are encouraged to start the process as soon as possible to ensure your application can be processed during this round of funding. Funding is dispersed on a first come first serve basis, and we have seen this funding go fast.

NGWA has a useful page of PPP Facts and Tips that will make the process easier to manage.

The Road to Forgiveness

Forgiveness of PPP loans will be crucial to many small businesses, so we encourage you to be ready to maximize your efforts in preparing to apply for loan forgiveness.

Remember, if your loan is not forgiven, your business will need to pay it back at a 1% interest rate over a two-year period.

There is an expectation that the loan forgiveness process will hit similar delays as the original loan applications. This is a new program that has proven popular, so you should expect some delays and confusion as you process your forgiveness request.

What expenses are forgiven?

PPP will forgive the following expense types for an eight-week period starting at the date of the first payment from your lender.

  • Payroll costs
  • Any payment of interest on any mortgage obligation (not including any prepayment of or payment of principal on a mortgage obligation) that was incurred before February 15, 2020
  • Any payment of rent under a leasing agreement in force before February 15, 2020
  • Any utility payment, including payment for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020. 

How to apply for forgiveness?

This is important. After your eight weeks of funding expire, your lender will be applying for forgiveness of the loan. So, it is vital to keep in contact with your lender and provide them with all the documentation they require to complete the loan forgiveness paperwork.

Speaking of paperwork…

Here is the list of paperwork required for the loan forgiveness application. Remember to communicate with your lender on what is needed for them to quickly and successfully apply for forgiveness. Lenders may require additional and more detailed paperwork; please be prepared!

  • Documents verifying the number of full-time equivalent employees on payroll and their pay rates, for the periods used to verify you met the staffing and pay requirements:
    • Payroll reports from your payroll provider
    • Payroll tax filings (Form 941)
    • Income, payroll, and unemployment insurance filings from your state
    • Documents verifying any retirement and health insurance contributions
  • Documents verifying your eligible interest, rent, and utility payments (canceled checks, payment receipts, account statements)

In the next month we will start seeing small businesses begin the loan forgiveness application. And, as they do, we will certainly discover unforeseen issues and setbacks. Please be patient, keep good records, and check back with NGWA often for updates on PPP and other resources on how we can keep operating during the COVID-19 outbreak.