Every law firm and sole attorney should apply as soon as humanly possible for the brand new Paycheck Protection Program (PPP) just enacted into federal law last week. In fact, since the "loan" can be forgiven if it is used mostly for payroll costs, you would be foolish not to apply.
Click here
for the PPP "loan" application that any participating bank will need.
Here are the highlights of the PPP:
Who makes the loans?
Any SBA approved lender.
Banks who are SBA approved are eager to do these loans even to those who have not been their customers before. I use the excellent and efficient TexanBank and it can all be done electronically. You can get information from my bank by e-mailing:
evelyn.hernandez@texanbank.com.
Who is eligible?
Generally any business that has less than 500 employees, was in operation on February 15, 2020 and had employees and is able to make a good faith certification that “that the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient.” Unlike most typical SBA loans, the PPP loans are unsecured loans requiring no collateral, no personal guarantee, and no showing that credit is unavailable elsewhere.
How much can you borrow?
2.5 times your average monthly payroll costs for the previous 12 months. The costs do not include federal payroll taxes or the portion of any employee's salary over $100,000, but does include health insurance costs and retirement matches made by the employer. I calculate my law firm will be able to "borrow" $128,000.
What can you use it for?
Payroll Costs, employee salaries, costs relating to the continuation of group health care benefits during paid sick, family or medical leave, group healthcare premiums, mortgage interest payments, Rent and Utilities, and interest on any other debt incurred before February 15, 2020.
What is the interest rate and term?
No payments for six months, interest is 1.0% and the term is two years.
How much can be forgiven?
8 weeks of expenditures starting on the date you receive the loan for the following costs: Payroll Costs, Mortgage interest, Rent and Utilities. Only 25 percent of the amount of loan forgiveness can consist of costs not defined as payroll costs. THE FORGIVEN PORTION OF THE LOAN IS TREATED AS CANCELED DEBT AND IS NOT TAXABLE!
What are the qualifications?
This program waives the SBA "credit elsewhere" test and a personal guarantee is not required.
When can I apply:
Beginning April 3, small businesses and sole proprietorships can apply through any existing SBA lender. Beginning April 10, independent contractors and self-employed individuals can apply.
What documents do I need:
Payroll documentation will be required. My bank had me provide my 2019 IRS forms 941 and a detailed payroll report from Quickbooks. SBA has told banks that they can rely on representations made by borrowers and are not required to verify any of the information on the PPP application for the loan or a later request to forgive part of the loan.
The bank will provide you a calculation spreadsheet to determine how much you are eligible to borrow.
Click here
to download the documentation checklist my bank required.
There is going to be a mad rush to apply for these "loans," so the sooner you apply, the quicker you can get the funds.
