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CARES Act: Paycheck Protection Program Application
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SUMMARY OF PPP LOANS
The Coronavirus Aid, Relief, and Economic Security (CARES) Act authorizes a new Small Business Administration (SBA) loan program now known as the “Paycheck Protection Program” (PPP). The Paycheck Protection Program provides small businesses with zero-fee loans of up to $10 million to cover payroll and other operating expenses. Of that loan, up to 8 weeks of payroll, rent, and utility expenses can be forgiven based on certain criteria. Payments on principal and interest, on the parts of the loan that are not forgiven, are deferred for six months and up to one year. Small businesses will be able to apply if they were harmed by COVID-19 between February 15, 2020 and June 30, 2020. Loans are available through June 30, 2020 and you can email the SBA to find a lender at [email protected]
Your business is eligible if your business, entity, franchise or sole proprietorship employs less than 500 employees and was in operation on February 15, 2020. As banks get ready to accept your application, you will need documentation. We recommend you begin to gather:
You may use the funds to cover (i) payroll costs, (ii) group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums, (iii) employee salaries, (iv) mortgage interest payments, (v) Rent, (vi) Utilities, (vii) interest on any other debt obligations incurred prior to February 15, 2020. (Loan may not be used for payroll costs for employees who receive annual compensation over $100,000).
For calculating your loan size, the bank will consider these payroll costs:
You can apply to your lender to forgive your loan for the amount of payroll costs, plus payments of interest, rent, and utilities, incurred during the 8-week period after the loan is disbursed. The amount that can be forgiven is proportionate to maintaining employees and wages for a period of time. Speak to your lender about this provision. Also, speak to your tax advisor to confirm that the forgiven portion of the loan will not be included in your taxable income. To apply for this loan forgiveness, you will need to provide the following documentation:
For any amounts of the loan not forgiven, the maximum term will be 10 years; the maximum interest rate charged will be 4 percent; there will be zero loan fees and zero prepayment fee. Principal and interest will be deferred for a total of 6 months to a year after disbursement of the loan.
You may apply for a Paycheck Protection Program (PPP) Loan AND for other SBA loans, including the SBA economic injury disaster loans, 7(a) loans, 503 loans, and microloans. However, you may not use funds from each of these programs for the same purposes.
IMPORTANT NOTICE FROM NEEDLEMAN MANAGEMENT
Needleman Management presents this information as a service to our tenants, clients, vendors and contractors as an informational resource only. We do not claim to be lawyers, accountants or tax professionals. We present this material for informational purposes only and is based solely as our best understanding at this time. We accept no liability for any action based on this information nor for any errors or omissions. We strongly suggest that you discuss the material provided herein with your legal and tax professionals.
The full 880-page CARES Act document can be found here.
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Last Updated: April 11, 2020