Paycheck Protection Program (PPP)

PPP is the new buzz in small business. We wanted to give you a short breakdown:

PPP stands for Paycheck Protection Program. It’s setup to help businesses that are affected by the COVID-19 disaster (affected can mean many different things – unsure? please ask!). So here’s how it works:

  • If you pay payroll for employees (including those that have a corporation that pays you, the owner a wage), or you are self-employed and had net income in the last year you are eligible
    • The amount you’re eligible to borrow is 2.5 times the average payroll/SE income for the last 12 months

I know I caught you there. Borrow? So this is just a loan, right? Nope, it gets better! So you get the loan, then what?

  • Beginning on the date of the loan origination, an 8 week clock starts ticking for loan forgiveness
  • First, 75% of the funds you receive must be spent on payroll for eligibility for 100% forgiveness
  • Then, the other 25% can be spent on payroll, rents, utilities, & mortgage interest
  • If you follow the above and spend all of the funds in 8 weeks (you’ll have to document your spending) then the loan will be forgiven in full

Sounds too good to be true, right? A few limiting factors:

  • If you’ve reduced the amount of employees or the salaries of employees since February of this year (alternative calculation for 2019 exists as well), and you haven’t re-staffed by June 30th, you may be subject to limitations regarding forgiveness of the loan
  • Employer’s portion of federal payroll taxes don’t count in the calculations, but health and retirement benefits paid by the employer do, as well as any employer paid state tax!
  • The loan will have a 1% interest rate on it that you’ll have to pay
  • Congress funded this with a limited amount of dollars: $349 billion to be exact. They’re currently considering adding more funds to the mix (maybe as soon as tomorrow, 4/9), but there are no guarantees of how long these funds will last
  • By choosing to do a PPP loan, you’re immediately ineligible for another option: the employee retention credit, which is setup as a payroll tax credit (this might be an alternative for those with severely reduced income and staff)

I’m still with you, where do I sign up?

  • We recommend speaking with your local banker that handles either your business checking account, or your business loan account
  • Most banks and many credit unions are participating
  • There’s others, including some fintech companies jumping in – even Intuit (maker of QuickBooks) says they’ll be up and running in the near future

Have more questions, need to understand a bit better how this might work for your business, or need help getting together your information to apply? Call us! 641-236-8083

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