Paycheck Protection Program

[vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column][vc_column_text css=”.vc_custom_1585861891399{padding-top: 20px !important;padding-right: 20px !important;padding-bottom: 20px !important;padding-left: 20px !important;background-color: #efefef !important;}”]Note: this does not constitute professional legal or financial advice.  This is merely a compilation of other resources and research we have done.  Please consult with your financial advisor or attorney if you have any questions.  Your application must be made to a lending partner of the SBA, and they will be the ultimate determiner of what is required. 

The Kresge Foundation has also posted helpful to-dos for nonprofits.  [/vc_column_text][vc_empty_space height=”20px”][button target=”_self” hover_type=”default” text=”Jump to Steps to Apply” link=”#steps”][vc_empty_space height=”10px”][vc_column_text]**Note as of 4/4/20 – We’ve heard from several nonprofit partners about their experiences with applying. Some have successfully submitted through their bank, others have found their banks aren’t participating in PPP, still others have found they don’t qualify (e.g. their banks are only allowing those with both checking and a loan or credit card to participate). Do you have an experience to share? Feel free to email us!

The Paycheck Protection Program (“PPP”) was included in the CARES Act, passed on March 27, 2020, and it authorizes up to $349 billion in forgivable loans to small businesses (including nonprofit organizations) to pay their employees during the COVID-19 crisis.

In just one week, the Small Business Administration (SBA) and its local lending partners have developed the application and process for employers with fewer than 500 employees to take part in the program. As a result, as of this publishing, there is some confusion and many details and interpretations still being developed.

Banks and other local lending partners of the SBA can begin accepting applications on Friday, April 3, 2020.  While the program is to be in place through June 30^th, many experts believe the full $349 billion will be depleted in a month (although it’s possible that Congress and President Trump will infuse more funds in the program).

To help our nonprofit partners apply for these funds as quickly as possible, we have compiled information from various resources to offer steps to help you.

What is the Paycheck Protection Program?

(source)

The Paycheck Protection Program is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This is a nearly $350-billion program intended to provide American small businesses with eight weeks of cash-flow assistance through 100 percent federally guaranteed loans. You can read the bill in its entirety here.

Program highlights

• All small businesses (including 501(c)3 and (c)19 nonprofits) are eligible
• The loan has a maturity rate of 2 years and an interest rate of 1% (***note, this is a change as of 4/2 at 10:18 pm. SBA has changed interest rate from 0.5% to 1%)
• No need to make loan payments for the first six months
• No collateral or personal guarantees required
• No fees
• The loan covers expenses dating back to February 15, to June 30 2020
• The loan can be forgiven and essentially turn into a non-taxable grant

The funds can be used for:

• Payroll and commission payments
• Group health care benefits/insurance premiums;
• Mortgage interest payments
• Rent and lease payments
• Utilities
• Interest on any other debt obligations that were incurred before the covered period.

Bench.co recommends you create a new, separate bank account to hold the funding so it’s easier to keep track of these expenses when you’re preparing to apply for loan forgiveness (but that’s up to you and your financial advisor).

More about loan forgiveness

(source)

The loan amounts will be forgiven as long as:

• The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and
• Employee and compensation levels are maintained.

Payroll costs are capped at $100,000 on an annualized basis for each employee. Because the Treasury Department expects so many small businesses to access this program, they expect that not more than 25% of the forgiven amount may be for non-payroll costs.

Loan payments will be deferred for 6 months and will be 0.5% interest.[/vc_column_text][vc_column_text]

What do I need to do? (and do quickly)

Remember, this doesn’t constitute legal or financial advice – this is our summation of information gathered to date to quickly guide you in exploring this with your financial or legal advisor:

1. Talk with your Board chair or the right person/committee on your Board of Directors about your plans to do this. You are obligating your organization to a debt (although one with great terms), and you need to be sure you are following proper Board processes.
2. Talk with your bank. Make sure they are a lender for this SBA program.  If they are, let them know you plan to apply and when.  If they aren’t find an SBA lender you can work with.  It’s likely that most financial institutions will be working with existing clients first on this high-demand program.
3. Review the treasury application and get your paperwork together. You will need:

1. 1. Payroll information for Calendar Year 2019. Per the attached Application from the US Treasury, Page 3, Second Paragraph: “Most Applicants will use the average monthly payroll for 2019.” This is our best understanding as of now, but Treasury directions can change and each individual bank may be different.
      1. Employee Earnings Record for 2019
      2. ***Edit as of 4/2/00 at 10:18 pm – New guidance from the SBA indicates that independent contractors cannot be included in the PPP loan, because they can apply for PPP on their own as sole proprietors. Thus, your organization should not include calculations from last year’s 1099s.***  [Original post from 4/2 at noon for reference: 2019 1099s for Non-Employee Compensation (as best we understand it, this does not include parties like labs, vendors, or contractors but is more for 1099 non-employees with whom you have an ongoing employment-like relationship)]
      3. Quarterly 941s/940 for 2019
      4. W2s/W3 for 2019
   2. State unemployment insurance payroll tax report for 2019.
   3. Totals of group health care costs paid for 2019.  You can confirm total premiums for 2019 from your health insurance broker.
   4. Totals of employer retirement plan contributions for 2019.
   5. Your average number of full time equivalent employees prior to these events. The application from Treasury asks for “number of jobs.” There is no clear guidance as of yet as to what they are looking for here exactly.

1. Your maximum loan amount is items AI, AII, B, C, and D added together, divided by 12 (for a monthly average payroll expense) and then multiplied by 2.5.  This is because the program is 2.5 times your average monthly payroll expense (all inclusive of those benefits).

4. Complete the application and get with your bank to formally submit.
5. Keep good records of expenses going forward. As was stated above, the funds can be used for:

• Payroll and commission payments
• Group health care benefits/insurance premiums;
• Mortgage interest payments
• Rent and lease payments
• Utilities
• Interest on any other debt obligations that were incurred before the covered period.

Bench.co recommends you create a new, separate bank account to hold the funding so it’s easier to keep track of these expenses when you’re preparing to apply for loan forgiveness (but that’s up to you and your financial advisor).

6. After 8 weeks of application, apply for loan forgiveness (directly from co)

In the 8 weeks following your loan signing date, all expenses related to the following can be forgiven:

• Payroll—salary, wage, vacation, parental, family, medical, or sick leave, health benefits
• Mortgage interest—as long as the mortgage was signed before February 15, 2020
• Rent—as long as the lease agreement was in effect before February 15, 2020
• Utilities—as long as service began before February 15, 2020

You’ll need to keep your records and have accurate bookkeeping to prove your expenses during the loan period. The lender must make a decision within 60 days of your forgiveness application submission.

Banks, CPAs, attorneys, and others all over the country are quickly working to gather best guidance on this brand new program and what it means for employers.  We will update this page as new information becomes available.[/vc_column_text][/vc_column][/vc_row][vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column][vc_raw_html]JTNDc3R5bGUlM0UlMEF1bCUyQyUyMG9sJTIwJTdCJTIwbWFyZ2luLWxlZnQlM0ElMjAzMHB4JTIxaW1wb3J0YW50JTNCJTIwbWFyZ2luLWJvdHRvbSUzQSUyMDEwcHglM0IlMjAlN0QlMEFvbCUyMGxpJTIwJTdCJTIwbWFyZ2luLWJvdHRvbSUzQSUyMDEwcHglM0IlMjAlN0QlMEElM0MlMkZzdHlsZSUzRQ==[/vc_raw_html][/vc_column][/vc_row]