04/01/2020
SURVIVING COVID-19 AS A SMALL BUSINESS.
Call or email us for a free consultation on how you can utilize the government stimulus package to keep your business alive!
At SSB Law, we too are a small business, and so many of our clients are small businesses too. We are here to help you navigate this unprecedented crisis. the Coronavirus Aid Relief and Economic Security Act was designed to help small businesses survive these uncertain times. Our Firm is here to help you. For an explanation of options and benefits available to you in the newly enacted stimulus package, schedule a call or video consultation with us.
We must act quickly!
Applications will begin to be accepted by banks authorized to do SBA loans on April 3, 2020.
One of the central pillars of the $2 trillion COVID-19 stimulus package known as the CARES Act is nearly $350 billion for forgivable loans to help small businesses with payroll costs and avoid layoffs. The program called the Paycheck Protection Program is run by the federal Small Business Administration. Guidelines for the program are set forth below.
Here are eight things you should know as you talk to your banker about a Payroll Protection Program loan.
1) Who is eligible: Any business that was in operation before February 15, 2020 with 500 or less employees.
2) How much can you borrow: Up to 250% of the average monthly payroll cost from the previous 12 months. The maximum loan amount is $10m. To determine the amount you might be eligible to borrow, take all your payroll expenses and multiply that by 2.5. The average monthly compensation of an individual employee or owners is capped at $8,333.33 per month which equates to an annualized salary of $100K. For example, if your average payroll is $100,000 a month then the most you can apply for is $250,000.
3) What payroll expenses can I use to determine the loan amount: Employee salaries, tips, sick or vacation pay, sick or parental leave, health care costs, retirement benefits (401k match) and state or local payroll taxes. It’s important to remember that the owner can include their income as well in this calculation. For individuals whose salary is included in the calculation, the salary is limited to the first $100,000 in annual income.
4) How can I use the loan proceeds: You can use the loan proceeds to cover payroll costs, rent, utilities, health insurance, paid sick leave, and mortgage interest payments (although not mortgage principal) on your office locations.
5) Will some amount of these loans be forgiven: Yes. The SBA will forgive repayment of PPP loan proceeds equal to the amount use to fund payroll, mortgage interest, rent and utility payments for the 8 week period starting from the loan origination date. If you layoff workers or reduce wages after obtaining a loan, the amount eligible for forgiveness will be reduced.
6) What about the amounts not forgiven: Any amount not forgiven by the SBA is repayable as a 10 year loan at a rate not to exceed 4 percent.
7) Do I have to have already laid off workers to be eligible: No. The goal of these loans is to help avoid layoffs or salary reductions.
8)What documents do I need to provide my lender: Guidelines will be published this week to know what documentation you need to provide to get a PPP loan but we expect the following:
*There are no collateral requirements for these loans or personal guarantees.
-2019 IRS Quarterly 940, 941 or 944 payroll tax reports
-Payroll reports for a twelve-month period (ending on your most recent payroll date), which will show the following information:
— Gross wages for each employee, including officer(s) if paid W-2 wages;
— Paid time off for each employee; Vacation pay for each employee; Family medical leave pay for each employee;
— State and local taxes assessed on an employee’s compensation 1099s for independent contractors for 2019
— Documentation showing total of all health insurance premiums paid by the company owner(s) under a group health plan
Include all employees and the company owners the sum of all retirement plan funding that was paid by the company owner(s) (do not include funding that came from employees out of their paycheck deferrals).
— Include all employees and the company owners
— Include 401K plans, Simple IRA, SEP IRA’s
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