How To Apply for Paycheck Protection Program (P3) Loans?

The Paycheck Protection Program (PPP) loan is a type of SBA loan designed to provide finance to help small businesses affected by COVID-19 keep their workers on payroll. These loans can be fully granted when they are spent on eligible expenses (mainly payroll) for a specified period.

Congress approved an additional $ 284 billion for these loans as part of the stimulus package adopted on December 27, 2020. More information on how to apply can be found below.

Please note that this information changes rapidly and is based on our current understanding of the programs. This can and probably will change. While we will monitor and update this information as new information becomes available, do not rely solely on it in your financial decisions. We encourage you to contact your attorneys, CPAs and financial advisors.

As you read, please note that changes to this legislation will primarily apply to all PPP loans except those already issued. Furthermore, most of the provisions of the drafting of the regulation will come into force immediately after the entry into force of the regulation, as if they were included in the CARES law adopted on March 27, 2020.

What types of PPP loans are there?

This legislation finances three categories of PPP loans:

  • First PPP loans for companies that have qualified under CARES but have not received funding (PPP “first draw” loans);
  • Secondly, obtaining PPP loans for businesses that have received a PPP loan but need additional financing; is
  • Additional funding for companies that paid off their first PPP loan or for some companies that did not receive the full amount they were entitled to.

Some news organizations, targeted marketing organizations, building associations, and 501 (c) (6) nonprofits can now obtain PPP loans. If you need money urgent apply for online cash from Oakpark.

No collateral or personal collateral is required for all PPP loans. For these new loans, any unallocated amount becomes a 1% loan for five years. (Loans granted before June 5, 2020 have a duration of two years.)

Who is eligible for the second PPP loan drawdown?

Many small businesses and independent entrepreneurs may be eligible for another PPP loan if they have already received a PPP loan and are qualified. First, like the first rounds of PPPs, eligible small businesses can include:

  • Small business, nonprofits, veteran organizations, tribal businesses, and small farmer cooperatives that meet SBA size standards.
  • Sole proprietorship, self-employed or independent entrepreneurs.

In addition, applicants for a second-draw PPP loan must meet the following criteria:

  1. The company must have no more than 300 employees and
  2. The company is expected to see sales decline of at least 25% for at least one quarter in 2020 from previous quarters (see below for more details).

Companies with multiple locations that have qualified under the CARES Act may qualify for a second lottery as long as they employ fewer than 300 people at each location. Exceptions to the CARES Act membership rule continue to apply.

Businesses must have “used, or will use, the full amount of the original PPP loan for authorized use by the payment due date of the second withdrawal PPP loan.”

Certain types of business are not eligible, including most businesses that would normally not be eligible for the SBA loans in question, companies whose main business is lobbying, and companies with some ties to China. (Note that the CARES Act provides an exception for some nonprofits and agricultural cooperatives that are normally ineligible for SBA 7 (a) loans.) Listed companies are not eligible for PPP loans for the second withdrawal.

How is the 25% reduction in sales calculated?

Entrepreneurs will compare gross revenue (see definition below) of the business for each quarter in 2020 with the same quarter in 2019 to see if revenue has decreased by at least 25%.

Note that this calculation applies to second-draw PPP loans, not first-draw PPP loans.

What if I haven’t been in business all of 2019? Stay with us. It sounds more complicated than it actually is:

If you weren’t in business in the first or second quarter of 2019, but in the third and fourth quarter of 2019, you can compare each quarter of 2020 with the third or fourth quarter of 2019 to see if the gross revenue has been reduced by at least the 25%.

If you were not in business in the first, second or third quarter of 2019, but were in business in the fourth quarter of 2019, you can compare each quarter of 2020 with the fourth quarter of 2019 to see if the gross profit has been reduced by at least the 25%.

A company must be in business before February 15, 2020 to apply. A company that went bankrupt in 2019 but operational before February 15, 2020 compares the gross profits of the second, third or fourth quarter of 2020 with the first quarter of 2020.

Some tax company executives have asked about the use of off-calendar quarters. According to ASB guidelines, companies that use a fiscal year to file taxes can only document a reduction in gross income with their tax return if their fiscal year includes all of the second, third, and fourth quarters of the calendar year. year on 1 December) (1 February, 1 March or 1 April).

Also note that for nonprofits and veterans, the term gross income has the same definition as gross income under section 6033 of the 1986 Internal Revenue Code.

In addition, a simplified calculation is available that the company can use to compare annual revenue losses. If you have been in business for the four quarters of 2019, you can compare your 2019-2020 annual income to prove the 25% reduction in sales and you will provide the annual tax return forms as documentation.

For loans up to $ 150,000, it is sufficient to certify the loss of income at the time of application. However, documentation of this loss of income must be provided before or at the time of requesting a pardon.

According to the SBA, businesses can use one of the following methods to document lost sales:

  • Quarterly closing. If the financial statements are unaudited, the applicant must sign and date the first page of the financial statements and initialize all other pages to confirm their accuracy. If the items representing gross income are not specifically disclosed in the financial statements, the applicant must indicate which items represent gross income.
  • Quarterly or monthly statements with payments from the respective quarters. If it is not clear which deposits on the statement represent gross income (for example, payments for the purchase of goods and services) and which do not (for example, capital injections), the company should note them.
  • Annual IRS tax returns (required if an annual reporting period is used). If the company has not yet filed a 2020 tax return, the applicant must complete the tax return forms, calculate the relevant gross income value and sign and date the return to confirm that the values ​​that go into the gross income calculation are the same values ​​that will be provided in the tax return of the filed company.

What is gross income?

The ASB guidelines define the gross income of for-profit enterprises as follows:

“All income in any form (subject to the company’s accounting policy) from any source, including the sale of products or services, interest, dividends, rents, royalties, commissions or fees, less returns and allowances. Generally, income is considered as “total income” (or in the case of a sole proprietorship, independent contractor or “gross income” of a self-employed person) plus “cost of goods sold. And it excludes net capital gains or losses as these terms are defined in the IRS tax return forms and reported.

Gross revenue does not include the following:

  • Taxes collected and remitted to a tax agency if included in gross or total income (for example, sales tax or other taxes collected from customers and excluding taxes levied on the company or its employees);
  • Proceeds from transactions between a company and its domestic or foreign subsidiaries; is
  • Amounts collected on behalf of a third party by a travel agent, real estate agent, advertising agency, conference administration service provider, freight forwarder, or customs broker.

All other items, such as B. Costs for subcontractors, reimbursements for purchases made by a contractor at the request of a customer, investment income and employee related costs such as payroll taxes cannot be excluded from gross income. ”

The amount of a PPP loan granted for the first withdrawal or an EIDL (grant) advance is not included in the borrower’s gross income.

Also note that for nonprofits and veterans, the term gross income has the same definition as gross income under section 6033 of the 1986 Internal Revenue Code.

How Much Can I Get on a Second P3 Draw Loan?

The maximum loan amount for Second Draw Loans is $ 2 million. In all of the following examples, the loan amount is capped at $ 2 million. Companies that are part of the same corporate group cannot raise more than $ 4,000,000 in PPP loans for the second draw. An eligible company can only obtain a second design loan.

A company can still claim up to 2.5 times the average monthly salary and labor costs. (To get the average gross monthly earnings, add the monthly earnings and divide by 12.)

You can find this number using one of two methods of your choice (except for companies with a NAICS code of 72 or higher – see below):

  • Multiply the average gross monthly earnings for the one year period preceding the loan date by 2.5 o
  • Multiply the average monthly gross salary for 2019 or 2020 (borrower’s choice) by 2.5.

New businesses (which had gone bankrupt for a year before February 15, 2020) use a slightly different formula to find average monthly labor costs. We divide the wage costs paid or accrued up to the date of their request by the number of months during which these costs were incurred and multiply the result by 2.5 (or 3.5 for companies with NAICS code 72 or more ). Again, new businesses must be in business by February 15, 2020 to be eligible.

Businesses with a NAICS code of 72 or higher (typically accommodations) can receive up to 3.5 times the average monthly wage and wage costs by choosing these two methods:

  • Multiply the average gross monthly salary for the one-year period prior to the loan being granted by 3.5 o
  • Multiply the average monthly gross salary for 2019 or 2020 (borrower’s choice) by 3.5.

Seasonal businesses are eligible to apply based on average monthly wage costs over a 12-week period between February 15, 2019 and February 15, 2020 (see definition of seasonal business below).

Keep in mind that all of these methods allow the company to use the billing charges incurred or paid during the period in question. (There may be labor costs, but you won’t pay them until the payment period.)

What is a seasonal employer?

A seasonal employer is defined as one who:

  • “It doesn’t work for more than 7 months per calendar year. or
  • In the previous calendar year, the gross pay for the 6 months of that year was no more than 33.33% of the employer’s gross pay for the other 6 months of that year.

What counts as a payroll?

Payroll accounting corresponds to the definition of the CARES law with a new addition (see below):

  • Salary, salary, commission or similar compensation,
  • Payment of tips in cash or equivalent (based on the employer’s records of previous tips or, if no record is available, a reasonable and good faith estimate by the employer of such tips),
  • Payment of vacation, parents, family, sick leave or sick leave;
  • Severance or separation allowance;
  • Payment required for the provision of ancillary benefits, including insurance premiums (to be paid by the employer);
  • Payment of an old-age pension (paid by the employer);
  • Payment of state or local tax on employee pay.
  • New : Group benefits include group life, disability, sight and dentist insurance

It does not include:

  • Compensation paid to an employee in excess of $ 100,000 per year on a prorated basis for the period in which payments are made or the obligation to make payments arises.
  • Any compensation to an employee whose primary residence is outside the United States;
  • Eligible Sickness Leave and Credit Eligible Family Leave Allowance under Sections 7001 and 7003 of the Family First Coronavirus Response Act
  • Do not include amounts paid to 1099 contractors on the payroll. You can apply yourself.

Self employed? Self-employed contractors and self-employed persons without employees may be eligible for 2019 or 2020 based on 2.5 months of net income (maximum $ 100,000) on their tax form as per Exhibit C (row 31). As of March 3, 2021, you are self-employed, you can also use the gross income (row 7) of your Program C. (Second draw PPP borrowers can use 3.5 times the net income or the gross income if the company The NAICS code starts at 72.) There is also an alternate recalculation for independent Schedule C filers using employees. The new calculations only apply to companies whose PPP loan applications have not yet been approved.

Read: self-employed? How to qualify for a PPP loan

Individual partners in a partnership do not apply alone. You can find the payment for partnerships in this guide.

What if you didn’t get a PPP loan upfront?

Funding is available for “first draw” PPP loans and you can apply on terms similar to the original CARES law. It is not necessary to demonstrate a 25% loss of income for a first loan and your business may be eligible if it has more than 300 employees, provided they are qualified, according to previous the CARES Act rules. Read the details of these loans here .

What if i have unpaid student debt?

To expand small business access to P3s, the SBA, in consultation with the Treasury Department, decided to lift the restriction on P3 qualifications for those with past due or defaulting federal student loans.

“This change will make PPP loans available to more needy borrowers and is in line with the intention of Congress to prioritize PPP loans for small businesses owned and controlled by socially and economically disadvantaged people, as described in section 8 (d ) (3) defines (c) the Small Business Act. ”

According to the Department of Education, “Black and Brown students are more dependent on student loans than their peers and suffer from disproportionately high crime rates. As a result, a ban on criminal borrowing students from obtaining PPP loans is more likely to prevent black entrepreneurs from accessing the loans they need. ”

What if I’ve already been convicted of a crime?

Previously, a felony conviction or charge in the past year would have excluded any entrepreneur with a stake of 20% or more in the company and its businesses from participating in P3. The SBA revised the previous restriction so that an entrepreneur convicted of non-financial fraud can apply for and receive a PPP loan.

The restriction continues to apply to any PPP loan applicant who has been convicted, convicted or sentenced or placed on probation (including pre-trial detention) for a crime involving financial fraud, bribery, embezzlement or false testimony in a case, or have been placed on probation (including probation) or applied for a loan or asked for financial support from the federal government for the past five years.

Can I earn more with my first PPP loan?

You can do this if you are eligible and the SBA has not made a remission payment to the lender for this loan. Under certain circumstances, you can request an increase in your PPP loan for the first withdrawal and you will need to work with the “lender” (the one who made the first loan).

When you have repaid all or part of your PPP loan, you can request an “amount equal to the difference between the amount withheld and the maximum applicable amount”. If you haven’t accepted the full amount, you can request a change so that you can borrow the full amount your business is entitled to.

Partnerships that were required based on partnership employees and other qualifying operating expenses, but did not include an amount for partner awards or seasonal activities that could have qualified for a longer loan. Important considering the total average monthly payments over a period of 12 weeks have been used by the seasonal employer, which starts February 15, 2019 and ends February 15, 2020, can also claim the difference.

Note: If you are self-employed and are submitting Attachment C and your P3 loan has already been approved, you may not be able to reapply due to gross income recalculation.

Are there loans for new PPP loans?

Yup! As with the first round of PPPs, these loans can be fully loaned if they are spent for the right purposes (mainly paychecks) during the right period. Remember that you are asking for forgiveness from the lender who granted you the PPP loan. You can use an online application form.

There are currently three applications for the granting of PPP loans:

  • Form 3508
  • 3508EZ module
  • 3508S module

Ab 3508S is a simplified module previously available for loans of $ 50,000 or less. It now covers loans of $ 150,000 or less. The borrower must:

  • Describe the number of employees retained thanks to the P3 loan.
  • The estimated amount of the loan proceeds for the payroll e
  • The total amount of the loan

The borrower must certify that they have met the loan requirements and keep records to prove compliance. (Employment records should be kept for four years, while the others should be kept for three years.)

We recommend opening a separate bank account to deposit your PPP funds and track spending.

How should I spend my money?

Similar to the first phase of the PPP, this program is primarily designed to keep employees (including the business owner or independent contractor) on payroll and pay other specific expenses.

To receive a full repayment, borrowers must spend at least 60% of the loan proceeds on eligible wages and salaries during the covered period. Unpaid eligible labor costs cannot exceed 40% of the loan amount. The list of eligible non-billable expenses has been expanded to include:

  • rents
  • Mortgage rates
  • Utility
  • Professional expenses covered *
  • Costs for material damage covered *
  • Supplier Costs Covered *
  • Costs covered for worker protection *

Corporate expenses covered are “the payment of any enterprise software or cloud service that manages the company provides products or services, processes, payroll or following labor costs, personnel and accounting functions of sales, or accounting or monitoring of deliveries simplified; Inventory, records and expenses ”

Costs covered property damage “costs related to damage and vandalism or looting caused public unrest in 2020 that was not covered by insurance or other compensation.”

The supplier’s costs are “excessive expenses incurred by a company against a supplier of goods for the supply of goods:

  • They are essential to the business of the company at the time of issue; is
  • is entered into under a contract, order or order – ” (i) valid at any time prior to the Covered Period in relation to the applicable Covered Loan; or “(ii) in relation to perishable goods in effect before or at any time during the covered period”.

The protection of the spending of workers covered designates the “operating expenses or capital to facilitate the adaptation of a company’s activities to the requirements or guidelines of the Department of Health and Human Services, Centers for Disease Control and of ” Administration for Occupational Safety and Health or equivalent requirements or guidelines, determined by a state or local government, during the period beginning March 1, 2020 and ending on the date of the national emergency declared by the President under the National Emergency Emergency Act (50 USC 1601) et seq. 8 ff) with respect to Coronavirus disease 2019 (COVID-19) expires due to compliance with hygiene standards, social distancing or other safety requirements for employees or customers related to COVID-19 ; may include the purchase, maintenance or refurbishment of assets under construction or expansion

  • a pass window device;
  • a ventilation or filtering system with internal, external or combined air or air pressure;
  • a physical barrier such as a sneeze screen;
  • an expansion of further internal, external or combined business premises;
  • an on-site or external medical screening center; or
  • other assets relating to compliance with the requirements or guidelines referred to in point A, established by the administrator (SBA) in agreement with the Minister of Health and Social Services and the Minister of Labor; The purchase of-
    • Covered Documents described in Section 328.103 (a) of Title 44, Code 16 of the Federal Ordinance or any subsequent ordinance;
    • Respirators with particle filters approved by the National Institute for Occupational Safety and Health, including those approved for emergency use only; or
    • other types of personal protective equipment determined by the administrator in consultation with the secretary of health and social services and the secretary of labor; and does not include residential or intangible properties; ”

(* Note that these new covered costs will apply to all PPP loans except those already granted.)

The “covered period” is the specific period during which the funds need to be spent. Start with setting up the PPP loan. (This is the date the money will be deposited into your bank account.) You can choose a covered period of 8 to 24 weeks after the loan is issued to spend the money.

Forgiveness can be complex. Therefore, read the SBA guidelines (SBA.gov/ppp) carefully and contact your legal or tax advisor as soon as possible.

Will an EIDL grant be deducted from my PPP for lending?

No. The legislation removes the obligation to deduct an EIDL grant (advance payment) for the purpose of awarding a PPP. Furthermore, within 15 days of the entry into force of this legislation, the administrator of the SBA must ensure equal treatment of borrowers whose loans have already been granted and whose grants have been deducted from the amount granted.

Where can I get one of the new PPP loans?

These loans are granted by lenders approved by the SBA. Nav compares borrowers to PPP loan partners who issue these loans. Open a free Nav account that can be linked to a lender.

What else do I need to know?

There are some other details that will be helpful in understanding them. Regarding the CARES law:

  • No credit check is required. Some PPP lenders have verified the applicant’s personal credit during the first PPP cycle. If this is important, be sure to ask before applying.
  • There is no personal guarantee.
  • Normal SBA warranty requirements are waived.

How to apply for one of these PPP loans?

Lenders approved by the SBA will issue these loans. You can view the first PPP loan application here and the second PPP loan application here. However, please note that you are submitting your application through your lender, which will likely ask you to complete an application online. By examining the application, you may be able to better understand what is required to be eligible.

You must submit the following information with your application:

If you are not self-employed , Form 941 (or other tax forms with similar information) and Quarterly Tax Forms for Unemployment Insurance for each quarter of 2019 or 2020 (whichever was used to calculate your paychecks) o an equivalent payroll and processor payroll register as well as references to the employee group’s pension, health, life, disability, sight and dental insurance contributions. A partnership must also include IRS Form 1065 K-1.

If you are self-employed and have no employees , IRS Form 1040 Schedule C (whichever was used to calculate the loan amount); Documents proving that you are self-employed (for example, IRS Form 1099-MISC, which lists benefits received for non-employees (box 7), an invoice, bank statement or record that the applicant is self-employed); and a 2020 invoice, bank statement or ledger showing that the applicant was operational on or around February 15, 2020.

If you are self- employed with employees , you must have IRS Form 1040 Schedule C (whichever was used to calculate the loan amount), Form 941 (or other equivalent tax forms or salary documents containing similar information), and quarterly state unemployment insurance. for 2019 or 2020, use the tax return forms for each quarter of 2019 or 2020 (depending on the amount used to calculate the loan amount) or equivalent salary documents and evidence of health, life, insurance contributions, disability, sight and dentistry by age and employee group, if applicable.

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