Help Is On The Way For Your Business Through The “Paycheck Protection Program” and TRP Sumner!

A major component of the Coronavirus Aid, Relief and Economic Security (CARES) Act signed by President Trump on March 27, 2020 is the Paycheck Protection Program. 

This program was intended by Congress to accomplish two things:

1. Help small businesses cover their near-term operating expenses during the worst of the crisis, and
2. Provide a strong incentive for employers to retain their employees.

Here are some of the highlights of the bill –

Who qualifies?

• Businesses impacted by the virus with less than 500 employees.

How much is available and what payroll costs are covered?

• The lesser of
  • $10 million or
  • The average monthly payroll of the previous year x 2.5
• Payroll costs include compensation plus related costs and benefits (i.e. vacation, sick leave, health and retirement benefits, state and local taxes on compensation).
• Compensation in excess of $100,000 for employees making more than $100,000 on an annual basis is NOT included.

What is the covered period for the loans?

• The covered loan period is February 15, 2020 to June 30, 2020.

How do I apply for a loan for my business?

• It is our current understanding that approval is on a “first come first served” basis due to a set amount of funding. APPLY AS SOON AS AVAILABLE AT YOUR LOCAL FINANCIAL INSTITUTIONS!
• It is also our current understanding that this will be a short application. It is not meant to establish creditworthiness.
• Apply at local banks and credit unions until June 30, 2020.
• Borrowers will make a good faith certification that various virus-related business concerns make this loan necessary and funds will be used to retain workers and/or make mortgage/rent payments.
• Qualifying business concerns include necessary changes in staffing, decrease in sales, business closures, or supply chain disruptions.
• No collateral or personal guarantees are required.
• The remaining loan balance after forgiveness will have a maximum maturity of 10 years and a maximum interest rate of 4%.
• Loan payments will be deferred for at least 6 months and up to 1 year.

How may the loan be forgiven?

• Spend all funds on qualified expenses, such as:
  • Salaries and wages,
  • Compensation to independent contractors up to $100,000 per contractor, and
  • Other business expenses such as rent, mortgage interest, utilities, health benefits, paid sick leave.

Are there different levels of loan forgiveness? Yes.

• For full loan forgiveness, you must:
  • Incur and spend loan proceeds on qualified expenses (See the “How much is available” question above.) within the 8-week period following the loan origination, and
  • Have no employee-based reduction, and
  • Salaries per employee cannot decrease by more than 25% compared to the most recent full quarter.
• Partial forgiveness is also available. The amount of the partial forgiveness is determined on a case-by-case basis. Call us for more information.
• This is an oversimplified example of how partial forgiveness might work.
  • The applying business had 100 full time employees from 1/1/2020 – 2/29/2020 and 100 full time employees on 2/15/2020.
  • The business laid off 25 employees in March 2020 and did not re-hire them.
  • The business received a $100,000 loan and used all of it on qualified expenses. 
  • Only $75,000 of that loan would be forgiven (75/100 employees).

What if my business doesn’t meet the criteria for full loan forgiveness? Can this be fixed?

• There is an opportunity to cure employee full time equivalents and payroll reductions.
  • Reductions must have been implemented between February 15, 2020 and the date that is 30 days after passage of the CARES Act which was March 27, 2020.
  • By June 30, 2020, employers must restore the employee count and the employee payroll levels that were in place as of February 15, 2020.

How will I apply for loan forgiveness?

• You may apply directly with your lender for loans to be forgiven provided that:
  • The funds were used for qualifying expenses, and
  • The borrower is able to produce documentation (including voided checks, payroll tax filings) that the loan proceeds were used for qualifying expenses.
• There is no deadline to apply for loan forgiveness, and lenders are required to make a determination within 60 days of receiving the application.
• The amount of the loan forgiveness is not taxable.

At TRP Sumner, it is our goal to give our clients and the communities we serve guidance and solutions to help combat the effects of COVID-19 on their business and personal lives. In the coming days, we will be publishing more in-depth and comprehensive information related to the provisions of the CARES Act and the Paycheck Protection Program. Please look for our emails and social media posts containing the latest updates. For more information or if you have any questions, you may also call one of our three locations.

Providing quality service even during challenging times is a priority for us at TRP Sumner. Be Well!