Paycheck Protection Program | Application Assistance and FAQs

By Hoge Fenton | 04.3.2020 | Client Alerts

Can I get help completing and submitting my application?
Yes. Our Hoge Fenton Rapid Response team is ready to assist you. Please contact Darlene Chiang or Embert Madison, Jr.

Am I eligible?
Lenders will rely on borrower certifications to determine borrower eligibility. Applications will be submitted by or through a SBA – approved lender.

In general, you are eligible for a PPP loan if (i) you have 500 or fewer employees whose principal place of residence is in the United States or are a business that operates in a certain industry and meet the applicable SBA employee-based size standards for the industry and (ii) one of the following applies:

You are a small business concern, as defined in section 3 of the Small Business Act (15 USC 632), and subject to SBA’s affiliation rules under 13 CFR 121.300(f) unless specifically waived in the Act, or
You are a tax-exempt nonprofit 501(c)(3) organization, or
You are a tax-exempt veterans organization 501(c)(19), or
You are a tribal business concerns 31(b)(2)(C)

Additionally, (iii) you must have been in operation on February 15, 2020 and either had employees for whom you paid salaries and payroll taxes or paid independent contractors (as reported on a Form 1099-MISC).

Independent contractors or eligible self-employed individuals may also apply so long as you were in operation on February 15, 2020.

Certain circumstances, such as illegal businesses, may still disqualify you.

How much can I borrow?
The maximum loan amount is the lesser of $10 million or an amount based on this formula:

Use payroll costs from the last 12 months for employees who reside in the U.S.
Subtract compensation paid to an employee, independent contractor, or sole proprietor in excess of $100,000 per person per year
Divide by 12
Multiply by 2.5
Add the outstanding amount of an Economic Injury Disaster Loan made between January 31, 2020 and April 3, 2020
Subtract the amount of any EIDL “COVID-19 advance” because it does not have to be repaid

Example:

Annual payroll: $1,500,000
$300,000 was paid to an employee, independent contractor, or sole proprietor in excess of $100,000 per person per year. $1,500,000-$300,000 = $1,200,000
Average monthly qualifying payroll = $100,000
Multiply by 2.5. $100,000 x 2.5 = $250,000
Add EIDL loan of $10,000. $250,000+$10,000 = $260,000

Maximum loan amount is $260,000

How are annual Payroll Costs calculated?
Payroll Costs consist of compensation to employees (whose principal place of residence is in the United States) such as:

Salary, wages, commissions, or similar compensation
Cash tips or equivalent based on records or good faith estimation by employer
Payment for vacation, parental, family, medical, or sick leave
Allowance for separation or dismissal
Payment for provision of employee benefits such as group health care coverage (including insurance premiums) and retirement
Payment of state and local taxes assessed on employee compensation

The following are excluded from the definition of Payroll Costs:

Compensation of an employee whose principal place of residence is outside the United States
Compensation of an individual in excess of an annual salary of $100,000, prorated as necessary
Federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020, including employee’s and employer’s share of FICA and Railroad Retirement Act taxes
Income taxes required to be withheld from employees
Qualified sick and family leave wages for which a credit is allowed under the Families First Coronavirus Response Act

What is the interest rate on a PPP loan?
The interest rate will be 1%

What is the maturity date of a PPP loan?
The maturity is two years

When will I have to being paying principal and interest on my PPP loan?

You will not have to make any payments for six months following the date of disbursement of the loan, however interest will continue to accrue on PPP loans during this six month deferment
The Act authorizes the Administrator to defer loan payments for up to one year

Can my PPP loan be forgiven in whole or in part?

Yes. The amount of loan forgiveness can be up to the full principal amount of the loan and any accrued interest
The borrower will not be responsible for any loan payment if the borrower uses all of the loan proceeds for forgivable purposes and employee and compensation levels are maintained
Not more than 25% of the loan forgiveness amount may be attributable to non-payroll costs

How should PPP loans be used?

At least 75% for the loan proceeds must be used for payroll costs
Costs related to continuation of group health care benefits during periods of paid sick, medical, or family leave
Group health care insurance premiums
Mortgage interest payments (not principal payment or prepayment)
Rent payments
Utility payments
Interest payments on any other debt obligations incurred before February 15, 2020
Refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020

Can I apply for more than one PPP loan?
No

Is the PPP “first-come, first-served?”
Yes

Hoge Fenton is ready to assist you with completing your PPP application so that:

You apply for the appropriate amount
Your application is submitted correctly the first time
Your application is submitted as quickly as possible

Our Hoge Fenton Rapid Response team is ready to assist you. Please contact Darlene Chiang or Embert Madison, Jr.


Darlene Chiang Of Counsel/Attorney Corporate & Business Law Intellectual Property Mergers & Acquisitions Tech Transactions +1.925.460.3367 email here	Embert Madison, Jr. Attorney Real Estate and Land Use Corporate & Business Law Cannabis Law Commercial Leasing +1.925.460.3370 email here

This information is provided as an educational service by Hoge Fenton for clients and friends of the firm. This communique is an overview only, and should not be construed as legal advice or advice to take any specific action. Please be sure to consult a knowledgeable professional with assistance with your particular legal issue. © 2020 Hoge Fenton