Updated April 8th, 2020
Many banks have opened their online portals for application and many small businesses have already responded. We’ve included a list of frequently asked questions, updated as more guidance becomes available, below.
In the meantime, here are some tools we have gathered and created to help you better understand your options.
- Link to our webinar, recorded on March 31st. This was recorded before much guidance was received. While there is still valuable information within it, please refer to the additional documents for updated details.
- Slides from the webinar. The slides outline both the PPP , as well as the SBA Economic Injury Disaster Loan. Same as above – these were created before additional guidance was received.
- Nichols Accounting Group Loan Eligibility Calculator – Excel Template*
- PPP Borrrower Information Fact Sheet
- PPP Loan Application – updated version as of April 3, 2020
*Before additional guidance was received, we believed that 1099 contract labor could be included in the loan amount calculation. The SBA released an interim final rule that indicates they do not qualify to be included in the loan amount calculation. The template above has been modified accordingly.
Frequently Asked Questions
Q: I’m self-employed. How do I calculate my payroll cost?
A: The CARES Act text says that you can claim your “wage, commission, income, net earnings from self-employment or similar compensation,” up to $100,000 a year. For many, that “income” will show on a schedule C or schedule F as income.
Q: Are independent contractors included in the payroll calculation?
A: No. They are eligible to apply for their own loan.
Q: How much hardship do I have to have, to apply?
A: There are no specific requirements. You do not need to prove a sharp drop in sales or a forced business closure, for example.
Q: Are small businesses required to have 500 or fewer employees to be eligible borrows in the PPP?
A: No. Small business concerns can be eligible borrowers even if they have more than 500 employees, as long as they satisfy the existing statutory and regulatory definition of a “small business concern” under section 3 of the Small Business Act, 15 U.S.C. 632. A business can qualify if it meets the SBA employee-based or revenue-based size standard corresponding to its primary industry.
Q: Question: The CARES Act excludes from the definition of payroll costs any employee compensation in excess of an annual salary of $100,000. Does that exclusion apply to all employee benefits of monetary value?
A: No. The exclusion of compensation in excess of $100,000 annually applies only to cash compensation, not to non-cash benefits, including:
employer contributions to defined-benefit or defined-contribution retirement plans;
payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums; and
payment of state and local taxes assessed on compensation of employees.
Q: What if an eligible borrower contracts with a third-party payer such as a payroll provider or a Professional Employer Organization (PEO) to process payroll and report payroll taxes?
A: SBA recognizes that eligible borrowers that use PEOs or similar payroll providers are required under some state registration laws to report wage and other data on the Employer Identification Number (EIN) of the PEO or other payroll provider. In these cases, payroll documentation provided by the payroll provider that indicates the amount of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s employees will be considered acceptable PPP loan payroll documentation. Relevant information from a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, attached to the PEO’s or other payroll provider’s Form 941, Employer’s Quarterly Federal Tax Return, should be used if it is available; otherwise, the eligible borrower should obtain a statement from the payroll provider documenting the amount of wages and payroll taxes. In addition, employees of the eligible borrower will not be considered employees of the eligible borrower’s payroll provider or PEO.
Q: What time period should borrowers use to determine their number of employees and payroll costs to calculate their maximum loan amounts?
A: In general, borrowers can calculate their aggregate payroll costs using data either from the previous 12 months or from calendar year 2019. For seasonal businesses, the applicant may use average monthly payroll for the period between February 15, 2019, or March 1, 2019, and June 30, 2019. An applicant that was not in business from February 15, 2019 to June 30, 2019 may use the average monthly payroll costs for the period January 1, 2020 through February 29, 2020.
Borrowers may use their average employment over the same time periods to determine their number of employees, for the purposes of applying an employee-based size standard. Alternatively, borrowers may elect to use SBA’s usual calculation: the average number of employees per pay period in the 12 completed calendar months prior to the date of the loan application (or the average number of employees for each of the pay periods that the business has been operational, if it has not been operational for 12 months).
We know that these are uncertain times.
At Nichols Accounting, we take pride in our unwavering commitment to work with privately held businesses to navigate success. Please contact us today if you would like to discuss your options.
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