SBA amends requirements for its Paycheck Protection Program
As funding and application guidelines for the Paycheck Protection Program change, visit our Coronavirus Resource Center and our running guide to Treasury PPP updates for our latest information and guidance. You can also contact our national SBA loan task force or your CohnReznick engagement team for assistance with filing for these loans and providing required financial documentation.
On the eve of the program’s launch, the SBA issued updated guidance (its first since the passage of the Coronavirus Aid, Relief, and Economic Security, or CARES, Act) with the intention to clarify the rules, qualifications, loan criteria, and other details for PPP participation. While a number of still outstanding issues require resolution, the updated guidance does address several previously unanswered questions about the program. It also contains some significant modifications.
If your business may be applying for financial assistance under the CARES Act, here is what you need to know about the PPP and the clarifications/changes made by the SBA yesterday.
The PPP provides $349 billion in lending capacity under the SBA’s Section 7(a) loan program. It was created to help small businesses (fewer than 500 employees) with funds to pay up to eight weeks of payroll costs, including benefits. The funds can also be used to pay mortgage interest, rent, and utilities. The maximum loan amount available to each qualifying business is the lesser amount of:
- 2.5 times the average monthly payroll costs (calculated according to a specified formula) during the calendar period of 2019 (for most)
- $10 million
Summary of new/modified guidance
Other criteria/issues clarified or changed on April 2
- The program employs “first come, first serve” prioritization.
- The per-employee salary limit to be used when calculating payroll costs is $100,000. Health insurance, benefits, and employer state taxes on payroll are included over and above this amount.
- The guidance defines the payroll period as the “last 12 months,” while the current application states “most applicants will use the average monthly payroll for 2019.” Lenders are being required to collect full 2019 calendar year payroll information to confirm payroll definition.
- Independent contractors/sole proprietors are eligible for the PPP based on their self-employment net income.
- Independent contractors may not be counted toward payroll costs.
- Federally illegal businesses, such as cannabis, may not participate in the program.
- The SBA plans to issue additional guidance on the applicability of affiliation rules.
How CohnReznick can help
For any business in the process of applying for a PPP loan, it is critical to adhere to the new guidance. This is especially true for the collection of payroll information, which must now be for Jan 1., 2019, to Dec. 31, 2019 (calendar year 2019).
We fully expect the SBA to continue making some modifications to the program, and we will keep you informed of any further updates.
CohnReznick has established an SBA Task Force to assist our clients with the application process and financial documentation for SBA loan assistance.
Visit our Coronavirus Resource Center for additional information on tax and legislative updates, as well as industry-specific strategies to help your business deal with disruption brought on by the coronavirus pandemic.
Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
Coronavirus Resource Center
InsightPPP loan forgiveness: SBA releases new FAQ on eligible costs, owner compensation, forgiveness reductions, and moreStephanie O’RourkRead the latest guidance on what costs qualify for Paycheck Protection Program (PPP) loan forgiveness, how to calculate forgiveness reductions, and more.
InsightREAL ESTATE: PPP loans aren’t free money, but they may be more forgivable than you might thinkNavigating the ever-changing Paycheck Protection Program (PPP) guidance can be difficult. Read about some main areas to consider to maximize your forgiveness.
InsightPaycheck Protection Program (PPP): Recent Treasury guidance on eligibility and moreGet updates on the SBA’s coronavirus-relief Paycheck Protection Program, such as eligibility guidance for large companies, hedge funds and private equity firms.
InsightUnderstanding the SBA's Economic Injury Disaster Loans (EIDL) and Advance program for COVID-19Businesses that have suffered losses related to the COVID-19 pandemic can apply for Small Business Administration (SBA) loans of up to $2 million. Here’s what to know.