Legal Analysts

Showing posts with label ppp. Show all posts
Showing posts with label ppp. Show all posts

Thursday, January 07, 2021

Second PPP $ - The Rules are out NOW

How do you get your Paycheck Protection Program Second Draw Loan? 

The rules are out now and here are the top 10 rules that you should know:

  1. Last day to apply & receive a new PPP is March 31, 2021;
  2. To qualify, you must use or will use full amount of your First Draw PPP loan on or before disbursement of second loan; 
  3. SBA may forgive up to the full principal loan amount; 
  4. Interest rate is 1%; 
  5. Maturity is 5 years; 
  6. Borrower must have 300 or fewer employees;
  7. Borrower must have experienced a revenue reduction of 25% or greater in 2020 relative to 2019 (quarterly comparison); 
  8. When comparing 2020 relative to 2019, any forgiveness amount of a First Draw PPP Loan that a borrower received in calendar year 2020 is excluded from a borrower's gross receipts (not disqualified from the second loan because of the first one);
  9. Each hotel, restaurant, or news organization with a location owned by a parent business in a separate legal business entity and employing not more than 300 employees is permitted to apply for a separate PPP loan; and
  10. Maximum loan amount = 2.5 months of the borrower's average monthly payroll costs.

PODCAST | How Businesses Can Get The PPP Round 2 Loan

On this Podcast, we discuss the highlights of the second Paycheck Protection Program with financial planner, Louis Soriano. Answering questions about whether:
  • You can get a second loan
  • What the qualifications are to apply
  • What size businesses can apply
  • How this works with taxes
  • If the first loan needs to be forgiven to get the second loan


Friday, June 05, 2020

US Senate Sends "Paycheck Protection Program Flexibility Act" to President Trump's Desk

Major revisions to the Paycheck Protection Program are on the way. The "Paycheck Protection Program Flexibility Act" amends the portion of the CARES Act that established the PPP. The changes are intended to make forgiveness of PPP loans more achievable for a greater number of businesses. Major changes include:
  1. 5 Year Maturity Date on Unforgiven Loan Amounts. Any portion of a PPP loan that is not forgiven is now subject to a minimum maturity date of five (5) years, up from two (2). 
  2. Payroll Tax Deferral. PPP borrowers can defer 50% of their share of payroll taxes to 2021 and the remaining 50% to 2022. 
  3. Expanded Forgiveness Period. What was an eight (8) week forgiveness period has been expanded to twenty-four (24) weeks from the origination of the loan or December 31, 2020, whichever comes first. 
  4. More Non-Payroll Expenses. Up to forty percent (40%) of the loan can now be used for non-payroll expenses and still be forgiven. A new SBA rule may be required as existing SBA rules say only twenty-five percent (25%) of PPP funds may be used for non-payroll expenses. 
  5. Full Employment Period Extension. Borrowers are now required to return to February 15, 2020 levels of full time employment by December 31, 2020 instead of June 30, 2020. 
  6. Full Employment Level Exceptions. Borrowers who are unable to restore their full time employment to February 15, 2020 levels can make use of two new exceptions - if they cannot find qualified employees for unfilled positions, or if their business activity is reduced due social distancing requirements, capacity limitations, or other similar restrictions in place for employee and customer safety. 
Keep an eye out for new SBA rules once President Trump signs this bill into law. If you already have a PPP loan, inquire with your lender to see how they will handle the material changes to your promissory note that this bill requires. 

Friday, April 03, 2020

Paycheck Protection Program - Regulations Explained

The Coronavirus Aid, Relief, & Economic Security Act (CARES Act), signed into law on 3/27/2020, includes expeditious relief for America's small businesses through loans funded at $349 billion.

§1102 of the CARES Act establishes the Paycheck Protection Program (PPP) under the SBA 7(a) Loan Program & §1106 provides forgiveness of up to the full principal of loan.

To fulfill the expeditious intent of providing relief to small businesses, the SBA issued its final rule on 4/2/2020 without the typical 30-day delay for effectiveness. 

We will be discussing the PPP in great detail on Real Estate Investing with Andrew Lieb this Sunday at noon on LI News Radio (WRCN / FM103.9) - If you are in business, don't miss this important segment - it could save your financial life. 

Here is a Summary of the Interim Final Rule found at 13 CFR Part 120
  • Loan Terms:
    • No collateral
    • No personal guarantee
    • No fees
    • Loan payments deferred 6 months (interest accrues)
    • 2-year maturity
    • 1% interest rate
    • Maximum loan $10MM
  • Loan Amount (calculation methodology):
    1. Aggregate payroll costs from last 12 months
    2. Subtract amounts paid to employee over $100K
    3. Divide net of steps 1 & 2 by 12
    4. Multiply step 3 by 2.5
    5. Add outstanding amount of an Economic Injury Disaster Loan made from 1/31/2020 to 4/3/2020 less advances
  • Loan Forgiveness Availability:
    • Employees are on the payroll for 8 weeks 
    • Money used for payroll, rent (lease dated before 2/15/2020), mortgage interest (obligation incurred before 2/15/2020), or utilities (service agreement before 2/15/2020)
    • 75% of loan forgiven must be used on payroll
    • Payroll includes:
      • Small business = Salary, wages, commission, cash tips, vacation / parental / family /medical / sick leave, allowance for separation / dismissal, employee benefits (health / retirement), state / local employment tax
      • Independent Contractor = wage, commission, income, or net earnings
    • Payroll doesn’t include: 
      • Employee with principal residence outside US
      • Salary over $100k (prorated)
      • Fed employment tax from 2/15/2020 to 6/30/2020
      • Qualified sick & family leave wages
    • To prove proper payments, lenders can rely on borrower’s documentation without any verification requirements
  • Application:
    • SBA Form 2483 (lender submits SBA Form 2484)
    • Applicant certifies that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.
    • Available from 4/3/2020 to 6/30/2020 or until exhausted
    • Borrower can only get 1 loan
    • First-come, first service
    • E-signature / consent permitted
  • Eligibility:
    • Must be small business, non-profit, independent contractor (sole proprietor)
    • Must have < 500 employees (certain exceptions if bigger) with principal place of residence in US
    • Must be in operations on 2/15/2020 with W2 employees
    • Must submit proof of eligibility of:
      • Payroll processor records
      • Payroll tax filings
      • Form 1099-Misc
      • Income & expenses for sole proprietorship
      • If don’t have above, bank records to demonstrate qualifying payroll
  • Ineligibility:
    • You are engaged in illegal activity under federal, state or local law (no legal marijuana) 
    • Household employer of nannies / housekeepers
    • Owner of 20% or more is incarcerated, on probation / parole, subject to indictment, criminal information, arraignment, or convicted of felony in last 5 years
    • Delinquent / defaults on SBA loan within last 7 years
  • Misuse Penalties:
    • Knowingly using loan for unauthorized purposes is fraud
    • False statements on application is up to 5 year imprisonment / up to $250K fine + up to 2 years imprisonment / up to $5K fine + up to 30 years imprisonment / up to $1MM fine
  • Lenders Fees Paid from SBA:
    • 5% of loans up to $350K
    • 3% of loans over $350K & less than $2MM
    • 1% of loans at least $2MM  
  • Agent Fees Paid by Lender from its Fees:
    • 1% of loans up to $350K
    • 0.5% of loans over $350K & less than $2MM
    • 0.25% of loans at least $2MM
·        Questions should be made to Lender Relations Specialist at the local SBA Field Office