Paycheck Protection Program (PPP) FAQs | Practicing DPMs | APMA
Paycheck Protection Program (PPP) FAQs

Last updated June 12—The Paycheck Protection Program (PPP) helps small businesses with their payroll and related costs for an eight-week period. Loan forgiveness is available for small businesses that maintain their workforce.

If I am ready to apply, what are the steps I need to take?
What documentation do I need to apply for a PPP loan?
What do payroll costs include?
What is excluded from the definition of payroll costs?
How do I calculate my maximum loan amount?
What if I lay off employees or reduce wages? Can I still get my loan forgiven?
Do I have to pay tax on amount of loan that is forgiven?
What happens if PPP Loan Funds are misued by the borrower?
Can I apply for another SBA loan?
If I need additional assistance, where do I go?

If I am ready to apply, what are the steps I need to take?

  1. Contact your accountant/financial advisor to prepare documentation.
  2. Reach to your local lender and ask if it is a participating lender. If not, visit www.sba.gov.
  3. Review and begin to complete the application. You apply directly to your lender.
  4. Once your loan is approved, request the loan forgiveness application from your lender.

What documentation do I need to apply for a PPP loan?

You will need to provide your lender with payroll documentation. See below for additional information which may be requested by your lender:

Company Information

  • Proof of existence of the company, including articles of incorporation, operating agreements, and proof of existence from the applicable state’s Secretary of State
  • Existing notes and debts of the company

Payroll

  • Payroll reports from 2/15/20 to 6/30/20, as well as the amount paid from 4/1/19 to the date of the loan
  • Form 941 for 6/30/19, 9/30/19, 12/31/19, and 3/31/20
  • Note: Sole proprietors should produce their 2019 Schedule C as salary will be determined by their net gains.

Benefits

  • Health-care benefits paid by the company from 2/15/20 to 6/30/20, as well as the amount paid from 4/1/19 to the date of the loan
  • Unemployment Tax Returns for 6/30/19, 9/30/19. 12/31/19, and 3/31/20, showing each individual’s compensation
  • Retirement plan summary including plan audits and Form 5500 from the most recent tax year

Rent and Utilities

  • Current lease agreements
  • Recent utility bills from 2/15/20 through 6/30/20

What do payroll costs include?

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
  • employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health-care benefits including insurance premiums; and payment of any retirement benefit;
  • state and local taxes assessed on compensation; and
  • for a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

What is excluded from the definition of payroll costs?

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

*This exclusion does not mean that the loan cannot be requested for anything related to employees making more than $100,000. Rather, for employees making more than $100,000, you are only allowed to request loan proceeds on the first $100,000 of their salary, prorated for the covered period.

How do I calculate my maximum loan amount?

Step 1: Aggregate payroll costs from the last twelve months for employees whose principal place of residence is the United States.
Step 2: Subtract any compensation paid to an employee in excess of an annual salary of $100,000 and/or any amounts paid to an independent contractor or sole proprietor in excess of $100,000 per year.
Step 3: Calculate average monthly payroll costs (divide the amount from Step 2 by 12)
Step 4: Multiply the average monthly payroll costs from Step 3 by 2.5.
Step 5: Add the outstanding amount of Economic Injury Disaster Loan (EIDL) made between January 31, 2020, and April 3, 2020, less the amount of an “Advance” under the EIDL COVID-19 loan (because it does not have to be repaid).

Example 1—No employees make more than $100,000

  • Annual payroll: $120,000
  • Average monthly payroll: $10,000
  • Multiply by 2.5 = $25,000
  • Maximum Loan amount is $25,000

Example 2Some employees make more than $100,000

  • Annual Payroll: 1,500,000
  • Subtract any compensation paid to an employee in excess of an annual salary of $100,000: 1,200,000
  • Average Monthly Qualifying Payroll: $100,000
  • Multiply by 2.5 = $250,000
  • Maximum loan amount is $250,000

Example 3No employee makes more than $100,000, outstanding EIDL Loan of $10,000

  • Annual payroll: $120,000
  • Average monthly payroll: $10,000
  • Multiply by 2.5 = $25,000
  • Add EIDL Loan of $10,000 = $35,000
  • Maximum loan amount is $35,000

Example 4Some employees make more than $100,000, outstanding EIDL loan of $10,000

  • Annual payroll: 1,500,000
  • Subtract compensation amount in excess of an annual salary of $100,000: $1,200,000
  • Average monthly qualifying payroll: $100,000
  • Multiply by 2.5 = $250,000
  • Add EIDL loan of $10,000 - $260,000
  • Maximum loan amount is $260,000

What if I lay off or reduce wages for employees? Can I still get my loan forgiven?

Your loan forgiveness will be reduced if you decrease your full-time employee headcount, or if you decrease salaries and wages by more than 25 percent for any employee who made less than $100,000 annualized in 2019. 

Note: You have until December 31, 2020, to restore your full-time employment and salary levels for any changes made between February 15 and April 26, 2020. 

The PPP Flexibility Act added additional exemptions to the reduction in the amount of loan forgiveness. Under the new law, the amount of loan forgiveness will not be reduced based on a reduction in the number of full-time equivalent employees if the borrower, in good faith:

  • can document that the borrower is: i) unable to rehire individuals who were employees of the borrower on February 15, 2020; and ii) unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or
  • can document an inability to return to the same level of business activity as that which existed prior to February 15, 2020, due to compliance with COVID-related health and safety guidance (e.g., standards for sanitation or social distancing) during the period from March 1 through December 31, 2020.

Do I have to pay tax on amount of loan that is forgiven?

No. APMA recommends speaking with your tax accountant or preparer on any tax-related guidance.

What happens if PPP Loan Funds are misused by the borrower?

If you use PPP funds for unauthorized purposes, SBA will direct you to repay those amounts. If you knowingly use the funds for unauthorized purposes, you will be subject to additional liability such as fraud.

Can I apply for another SBA loan?

Yes, while small businesses can only apply for one PPP loan, they can apply for additional SBA loans, including the EIDL loan. If your EIDL loan was not used for payroll costs, it does not affect your eligibility for a PPP loan. If your EIDL loan was used for payroll costs, your PPP loan must be used to refinance your EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan. 

At least 75 percent of the PPP loan proceeds shall be used for payroll costs. For purposes of determining the percentage of use of proceeds for payroll costs, the amount of any EIDL refinanced will be included. However, for purposes of loan forgiveness, the borrowers will have to determine the proceeds used for the payroll costs in order to determine the amount forgiveness.

If I need additional assistance, where do I go?

We recommend speaking with your accountant or financial advisor. SBA offers work with local partners to provide assistance to small businesses, and you find a local partner here. For more information, access answers to FAQs issued by The Small Business Administration and in consultation with the Department of Treasury.


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