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SMALL BUSINESS STIMULUS PACKAGE LOANS: YOUR QUESTIONS ANSWERED

By Samuel Park and Stacey Lynch

If your business did not receive a small business stimulus loan from the federal Paycheck Protection Program (PPP) before funds ran out, there‘s still hope! Another $310 billion was just approved to help small businesses retain their staff during the State’s shelter in place order. 

If you’re still considering applying for funding, read on to find out the specifics of the program and how it can benefit your small business.

What does the PPP Do?

The Paycheck Protection Program will provide much needed cash-flow assistance to eligible small businesses through 100 percent, federally guaranteed loans. It is important to keep in mind that money received through the PPP is a loan, but it’s possible that the entire PPP loan could be considered forgivable. For any amounts not forgiven, the maximum term is ten years, the maximum interest is four percent, and there are zero loan fees and prepayment fees.

Am I Eligible For the PPP?

Generally to be eligible for the PPP loan, the borrower must be a small business, nonprofit organization, veteran’s organization, or tribal business in operation as of February 15, 2020 with fewer than 500 employees and whose principal place of residence is in the United States. This program is also available for sole proprietors and independent contractors. In addition to being operational as of February 15, 2020, eligible recipients must have paid employee salaries and payroll taxes or compensated independent contractors.

Borrowers seeking a PPP loan must also certify that the loan request is necessary to support the ongoing operations during the current, uncertain economic conditions. The borrower must also acknowledge that the funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments. Lenders are expected only to perform a good faith review prior to making a determination on a PPP loan.

How Big a Loan Can I Get with a PPP?

The maximum amount of the loan is the lesser of either (a) $10 million or (b) 2.5 x the business’s average total monthly payroll. For purposes of the PPP,  payroll costs include salary, wage, commission, and cash tips;  payment for leave (vacation, parental, family, medical or sick leave); allowance for dismissal or separation; payment of group health care benefits and insurance premiums; payment of retirement benefits; and payment of State or local tax assessed on employee compensation. For independent contractors and sole proprietors, the number is based on the sum of payments of any compensation or income considered wage, commission, income, net earnings, etc.

How Must the Loan be Used?

The small business stimulus loans through the PPP may be used for the following expenses between February 15, 2020 through June 30, 2020:

• Payroll costs (at least 75% of the loan amount must be used)

• Costs related to continuation of group health care

• Employee compensation

• Mortgage interest obligations

• Rent and utilities

• Interest on debt incurred prior to the loan

• Refinancing of SBA EIDLs that are made between January 31, 2020 and April 3, 2020.

How Will the Loan Be Forgiven?

The PPP loan could be forgiven for any amount spent during the eight-week period after the origination date, subject to proper documentation of payroll costs, mortgage interest on mortgages that had been in place prior to February 15, 2020, rent for lease agreements existing prior to February 15, 2020 and payment of services for electricity, gas, water, transportation, phone, or internet access that was established before February 15, 2020. It is also important to note that the forgiveness amount would be reduced if you do not maintain your payroll. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels.  

Are you ready to get your funding? The experienced corporate attorneys at Gardi, Haught, Fischer & Bhosale LTD Ltd. can help you maximize your small business stimulus package and loan forgiveness for the PPP. Contact Samuel Park at spark@gardilaw.com or Stacey Lynch Slynch@gardilaw.com for your free consultation.