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Paycheck Protection Program FAQ

Isn’t the money gone? Should I still apply? 

On 04/21/20, new funds — to the tune of $310 billion — were announced to have passed through the Senate that will replenish the Paycheck Protection Program (PPP). $60 billion of that is reserved for small businesses *without* existing banking relationships. Applications are now being accepted again.

By 04/16/20, the $349 billion initially appropriated for PPP loans had been claimed, i.e. processed by banks and approved by the SBA.

How can I apply for the new round of PPP funds?

Right now, while the PPP hasn’t yet been re-funded, new loan applications aren’t being accepted. However, once the new bill is signed into law, it’s expected that the SBA will announce when it will accept applications again. Many small business owners PPP funds have been on a first-come, first-served basis so prepare your materials now.

As of April 15th, the total number of processed loans amounted to 1.3 million — yet there are more than 30 million small businesses in America. That’s just 4% of all small businesses! 

Where can I apply and how much can I receive? 

In short, the amount of funding depends on the size of your business. You can get up to 2.5x the average monthly payroll costs of the last 12 months (subject to a $10 million cap). Click here to start an application.

What expenses are eligible? 

Payroll costs incurred between February 15th, 2020, and June 30th, 2020. And they will be capped at $100,000 annualized for each employee.

Do PPP loans cover… 

    • Cash compensation? Yes.
    • Tips? Yes. 
    • Vacation, paid sick, parental, family, medical, and other leaves? Yes.
    • 401(k) employer matching contributions? Yes. 
    • Health insurance premiums? Yes.
    • Severance or allowance for dismissal or separation? Yes. 
    • State and local taxes on employee compensation? Yes.
    • Federal taxes, like FICA? No.
    • Rent? Probably (though maybe not on a home office since these are deducted before determining your net income).
    • Utilities? Yes.

UPDATE 4/13/20: The Treasury released a clarification statement indicating that the $100,000 maximum applies to cash compensation but does not apply to employee benefits of monetary value, including employer contributions to a defined-contribution retirement plan, such as a 401(k), as well as state and local taxes assessed on employee compensation and group health care coverage (including insurance premiums). 

Are freelancers eligible to apply?

Yes, freelancers could submit applications starting April 10th. (The program opened to employers with fewer than 500 employees on April 3rd.) If you employed a freelancer at your small business, the freelancer should apply on their own and the small business owner should not include freelancer expenses in their application. You’ll need your schedule C to complete your application.

What if I operate a seasonal business?

A lender may consider whether a seasonal borrower was in operation on February 15, 2020, or for an 8-week period between February 15, 2019, and June 30, 2019.

What if I laid off employees? 

Employers can rehire their recently laid-off employees through June 30, 2020. The program is designed to help small businesses keep employees on payroll between February 15th and June 30th.

What if I use a PEO?

Eligible borrowers that use PEOs or similar payroll providers are required under some state registration laws to report wage and other data on the Employer Identification Number (EIN) of the PEO or other payroll provider. In these cases, payroll documentation provided by the payroll provider that indicates the amount of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s employees will be considered acceptable PPP loan payroll documentation. Relevant information from a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, attached to the PEO’s or other payroll provider’s Form 941, Employer’s Quarterly Federal Tax Return, should be used if it is available; otherwise, the eligible borrower should obtain a statement from the payroll provider documenting the amount of wages and payroll taxes. In addition, employees of the eligible borrower will not be considered employees of the eligible borrower’s payroll provider or PEO. 

Should payments made to an independent contractor or sole proprietor be included in calculations of the eligible borrower’s payroll costs?

No.

How long do I have to use the money I get?

The clock starts as soon as you receive notification that your loan has been approved and you’ll have 8 weeks to use it. 

Details of the loan:

  • Fee to apply: None
  • Interest rate: 1.00% 
  • Loan deferment: 6 months for interest and principal payments 
  • Loan maturity: 2 years
  • Collateral needed to apply: None
  • Forgiveness: Clarifications are needed, though not more than 25% of what’s forgiven can be for non-payroll costs  

Still have questions? 

We do, too. 

There is still confusion and clarification statements on the PPP are routinely being issued about the details of how this program will work. As new information is available, we’ll update our resources and build out this FAQ with more.

Meantime, here is a bit more: 

 

If you have questions about our resources or how the CARES Act or COVID-19 affects your retirement plan, please don’t hesitate to call us at (855) 622-7824 or email us at [email protected] We’re available Mon-Fri:  9am – 5pm PST.

We believe that everyone deserves access to a secure financial future, which is why we make it easy to provide a 401(k) to your employees. Human Interest offers a low-cost 401(k) with automated administration, built-in investment advising, and integration with leading payroll providers.

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Disclosures

The content in this blog post has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Human Interest's investment advisory services are provided by Human Interest Advisors, LLC, an SEC-Registered Investment Adviser. Investing involves risk and may result in loss. Past performance is no guarantee of future results, and expected returns may not reflect actual future performance.