The Paycheck Protection Program Opens Friday April 3rd
If you are not a small business owner, then you KNOW a small business owner. I encourage you to look into the Paycheck Protection Program. Do not delay on getting the information, and applying. It does not matter if your business is local to the Jersey Shore, or even the State of New Jersey, this is a nationwide program. The program will be organized through the Small Business Administration (SBA) but will be run through local banks.
What I’ve outlined below only scratches the surface of information available. It needs to be said, “this post does not constitute legal, business or tax advice!” The main message to take from this post is to be ready to apply to the Paycheck Protection Program.
Start by visiting SBA.gov/Coronavirus.
Then, I’d encourage business owners to visit the US Chamber’s information on the Paycheck Protection Program. That website has a great example of how to calculate what you could be eligible to receive.
Next, we hope folks are following us on Twitter. But we also encourage you to follow our friend Brent Beshore. Brent is the CEO of Permanent Equity And he always shares great thoughts and leadership in our #FinTwit community. Here’s a great example of what they are working on:
We’re building a toolkit for #smallbiz to help navigate the current economic turmoil and gov’t assistance. Now available:
1) Calculator for Paycheck Protection Program
2) Our internal memo on EPSLA
3) Our internal memo on EFMLEAAdding more as we go…https://t.co/8tVNYudKoE
— Permanent Equity (@PermanentEquity) April 1, 2020
One of the biggest questions we’ve heard has been “exactly HOW do we apply for the Payroll Protection Program?”
Answer: Call your bank. Call them today. Many banks are participating in the program.
From Treasury Secretary Steve Mnuchin: “This legislation provides small business job retention loans to provide eight weeks of payroll and certain overhead to keep workers employed,” said Secretary Mnuchin. “Treasury and the Small Business Administration expect to have this program up and running by April 3rd so that businesses can go to a participating SBA 7(a) lender, bank, or credit union, apply for a loan, and be approved on the same day. The loans will be forgiven as long as the funds are used to keep employees on the payroll and for certain other expenses.”
The new loan program will be available retroactive from Feb. 15, 2020. So employers can rehire their recently laid-off employees through June 30, 2020.
It’s important to understand that all loans under this program will have the following identical features:
- Interest rate of 0.5%
- Maturity of 2 years
- First payment deferred for six months
- 100% guarantee by SBA
- No collateral
- Personal guarantees: not required
- No borrower or lender fees payable to SBA
Brian Thompson wrote up a great FAQ in Forbes. You can read his entire post here. But one point I’ll highlight from Thompson’s post: “Many sole proprietors or independent contractors have wondered what counts as payroll, if they don’t have any employees. Section 1102(a)(2)(A)(viii)(bb) expands the definition of payroll costs to include ‘the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment or similar compensation that is not more than $100,000.'”
So, what constitutes payroll?
- Salary, wages, commission (not to exceed $100,000)
- Cash tips or equivalent
- Vacation, parental, family, medical or sick leave
- Severance or separation pay and any retirement benefit
- Group health care benefit pay including insurance premiums
- State and local tax on the compensation of employees
This program might provide a lifeline for small businesses that were suddenly in a position to shut down; and shut down without any timeline or guidance regarding how long the shutdown might be in length.