Details about the Paycheck Protection Program (PPP) part of the recently passed CARES Act

Details about the Paycheck Protection Program (PPP) part of the recently passed CARES Act

Check with your own accountants and other financial advisers to see how the Paycheck Protection Program may apply to you and your business.

What is the Paycheck Protection Program (PPP)?

The Paycheck Protection Program “PPP” loan offered through the Small Business Administration makes the most sense for companies with less than 500 people to apply for as it allows for loan forgiveness.  The Economic Injury Disaster Loans or the Payroll Tax Credit do not have forgiveness provisions.

Government resources are through the Colorado SBDC and Colorado SBA.  

The two best accounting resources we have found are Plante Moran (general overview) and Lathrop GPM (more technical).    

Key terms for the PPP loan:

Total amount organizations can borrow:

2.5 times the average monthly payroll costs incurred in the one-year period before the date of the loan.  

Loan Use is limited to:

(1) payroll costs; (2) continuation of group health care benefits during periods of paid sick, medical, or family leave, or insurance premiums; (3) salaries or commissions or similar compensation; (4) interest on mortgage obligations; (5) rent; (6) utilities; and (7) interest on other outstanding debts.  

Forgiveness: 

The following costs are subject to forgiveness equal to the amount spent by the borrower during the 8-week period beginning on the date the loan is originated: (1) payroll costs capped at $100,000 (on an annual basis) per employee (including additional wages paid to tipped employees); (2) interest on any mortgage obligation; (3) rent; and (4) utilities payment.  It can only cover organizations with payrolled employees.  

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You must keep all employees on your payroll from February 15, 2020 and June 30, 2020. Refer to the Lathrop GPM guide under “Loan Forgiveness” for further details.

The accrued interest is still payable – interest accrues at a maximum 4%.

Lenders

Local banks who administer SBA loans (SBA 7(a) lenders) will be handling applications.  See page 28 of this document to see the lenders for your location.  

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