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Paycheck Protection Program (PPP) SBA Loan Program Easily Explained

There are two types of SBA Loan programs available to small businesses and nonprofits affected by Covid-19 under the CARES Act Fiscal Stimulus Package. The Paycheck Protection Program (PPP) and The SBA’s Economic Injury Disaster Loan Program. The below summarizes the details of the  SBA’s Paycheck Protection Program (PPP). We will summarize the SBA’s Economic Injury Disaster Loan Program in another post.

It has been Financing Solutions’ experience that SBA Loans in the past have taken a long time to be approved and paid out. With the number of small businesses applying we believe this will also be the case with the SBA Paycheck Protection Program (PPP).

Financing Solutions’ recommendation is that you do apply for The Paycheck Protection Program (PPP) Program but that you consider setting up a line of credit with Financing Solutions in the meantime. Financing Solution’s line of credit program is built for both small businesses and nonprofits with yearly revenues greater than $400,000 and $200,000 respectfully. The Financing Solutions line of credit program costs nothing to get in place, nothing when not being used, and is inexpensive when used. It requires no personal guarantees and no collateral. The Line can be approved in 48-72 hours and is easy to get in place. Financing Solutions is still approving many applications.

Click here for a simple 2- minute, no-obligation Financing Solutions application

Paycheck Protection Program (PPP) – Who can help?

Who can make these loans?

Lenders with delegated authority from SBA, which allows Lenders to determine eligibility
and creditworthiness without going through SBA channels. M&T is an SBA Lender with
delegated authority.
How will banks evaluate the eligibility of borrowers under the PP Program?
A Lender must consider whether the borrower:
• Was in operation on February 15, 2020; and
• had employees for whom the borrower paid salaries and payroll taxes OR paid
independent contractors, as reported on a Form 1099-MISC
When is the application period?
▪ February 15, 2020 through June 30, 2020

Paycheck Protection Program (PPP) – Size Requirements

Beginning on February 15, 2020 and ending on June 30, 2020, in addition to small
business concerns, any business concern, a non-profit organization, veterans organization, individuals who operate as sole proprietors or independent contractors, eligible self-employed individuals, or Tribal small business concern is eligible to receive a covered loan if they employ not more than the greater of—
▪ 500 employees; or
▪ if applicable, the SBA size standard for employees in the industry in which the
borrower operates (NAICS code)
The term employee includes individuals employed on a full-time, part-time or other basis.
• For business concerns with more than 1 physical location (e.g. food services industry),
the 500 employees can be measured per physical location.

Paycheck Protection Program (PPP) – Maximum Loan Amount

The maximum loan amount under the PP Program is the lesser of:
▪ the average total monthly payments by the applicant for payroll costs incurred
during the 1-year period before the date on which
the loan is made multiplied by 2.5*;
▪ plus the outstanding amounts of any Emergency Injury Disaster Loan (EIDL)
obtained on or after January 31, 2020 which is to be refinanced under this loan;
▪ $10,000,000
*Special rules exist for seasonal employers and businesses not in existence beginning
2/15/2019 and ending on 6/30/2019.

Paycheck Protection Program (PPP) – Maximum Loan Amount

Payroll Costs include the sum of payments of any compensation with respect to
employees that is a:
▪ salary, wage, commission, or similar compensation;
▪ payment of cash tip or equivalent;
▪ payment for vacation, parental, family, medical or sick leave;
▪ allowance for dismissal or separation;
▪ payment required for the provision of group health care benefits, including insurance premiums;
▪ payment of any retirement benefits; or
▪ payment of state or local tax assessed on the compensation of employees;
▪ the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount not exceeding more than $100,000 in 1 year, as prorated for the period beginning on February 15, 2020 and ending on June 30, 2020.

Payroll Costs do NOT include:
▪ the compensation of an individual employee’s in excess of an annual salary of $100,000 as prorated for the period beginning on February 15, 2020 and ending on June 30, 2020;
▪ taxes imposed or withheld under FICA (Social Security and Medicare), Railroad Retirement Act, and IRC Chapter 24 (income tax at source);
▪ any compensation of an employee whose principal place of residence is outside the United States;
▪ qualified sick leave or family leave wages for which a credit is allowed under the Families First Coronavirus Response Act.

Paycheck Protection Program – Use of Loan Proceeds

▪ Between February 15, 2020 and ending on June 30, 2020, the eligible recipient can use
the proceeds from the loan for:
• payroll costs;
• costs related to the continuation of group health care benefits during periods;
of paid sick, medical, or family leave, and insurance premiums;
• employee salaries, commission, or similar compensations;
• payments of interest on any mortgage obligation (excludes prepayment);
• rent (including rent under a lease agreement);
• utilities; and
• interest on any other debt obligation that was incurred before the period.

Paycheck Protection Program – Good Faith Certification Requirements

An eligible recipient applying for a covered loan must make a good faith certification that:
▪ the uncertainty of current economic conditions makes necessary the loan request to
support the ongoing operations of the eligible recipient;
▪ acknowledging that funds will be used to retain workers and maintain payroll or
make mortgage payments, lease payments, and utility payments;
▪ that the eligible recipient does not have an application pending for a loan under this
subsection for the same purpose and duplicative of amounts applied for or received
under a covered loan; and
▪ during the period beginning on February 15, 2020 and ending on December 31, 2020,
that the eligible recipient has not received amounts under this subsection for the
same purpose and duplicative of amounts applied for or received under a covered

Paycheck Protection Program – Requirements & Fees

The administration has no recourse against any individual shareholder, member, or
partner of an eligible recipient of a covered loan for nonpayment of any covered loan
UNLESS it is used for purposes not authorized.
No Guarantee Between February 15, 2020 and ending on June 30, 2020, no personal guarantee is required for the covered loan AND no collateral is required for the cover loan.
No Fees Between February 15, 2020 and ending on June 30, 2020, with respect to the covered loan, the Administrator will not collect a fee.

Paycheck Protection Program – Deferral of Payment

Between February 15, 2020 and ending on June 30, 2020, the Administration provides
complete payment deferment relief for impacted borrowers with a loan for a period of
not less than 6 months and not more than 1 year.
▪ This includes the payment of principal, interest, and fees
An impacted borrower is an eligible receipt who is in operation on February 15, 2020 and
has an application for a covered loan that is approved or pending after the date of

Paycheck Protection Program – Loan Forgiveness

An individual or entity that is eligible to receive a covered loan is eligible for forgiveness
of indebtedness on that loan in an amount equal to the sum of the following costs
incurred and payments made during the 8-week period beginning on the date of the
origination of a covered loan:
• payroll Costs (reference definition above);
• any payment of interest on any covered mortgage obligation
• any indebtedness or debt instrument incurred in the ordinary course of business that is a
liability of the borrower is a mortgage on real or personal property and was incurred
before 2/15/2020;
• any payment of a rent obligation made under a leasing agreement in force before
• any utility payment related to the distribution of electricity, gas, water,
transportation, telephone or interest access for which service began before

Paycheck Protection Program – Loan Forgiveness Documentation Requirements

The following must be provided to the Lender:
▪ Documentation verifying the number of full-time equivalent employees on payroll and pay rates including payroll tax filings reported to the IRS and State income, payroll, and unemployment insurance filings;
▪ Documents, including canceled checks, payment receipts, transcripts of accounts, or other documents verifying payments on covered mortgage obligations, payments on covered lease obligations, and covered utility payments.
▪ Certification from a representative of the eligible recipient authorized to make such certifications that:
• the information presented is true and correct; AND
• the amount for which forgiveness is requested was used to retain employees, make interest payments on a covered mortgage obligation, make payments on a covered rent obligation, or make covered utility payments;
▪ any other documentation the administrator determines is necessary.
No eligible recipient shall receive forgiveness without submitting to the lender that is servicing the covered loan the documentation required.

Paycheck Protection Program – Loan Forgiveness Timeframes

Timing of Loan Forgiveness Decision:
No later than 60 days after the date on which a lender receives an application for loan
forgiveness from an eligible recipient, the lender will issue a decision on the an

Any amount would be includible in gross income of the eligible recipient by reason of
forgiveness is excluded from gross income.

Paycheck Protection Program – Reduction of Loan Forgiveness

The amount of loan forgiveness may be reduced if there is a reduction in full
time equivalent employees when compared to the average number of full time equivalent employees per month employed by the eligible recipient during the period beginning February 15, 2019 and ending on June 30, 2019 OR January 1, 2020 and ending on February 29, 2020.
▪ Reductions also exist for certain reductions in total salary or wages of any
employees in excess of 25 percent.
• Employees in this instance refer to employees who in 2019 did not
receive a wage or salary at an annualized rate of more than $100,000.
▪ Special rules for tipped workers and rehires during a certain time period.

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