What is the Paycheck Protection Program (PPP)? Here’s Your Simple Guide
25 Executive Summary
Many Physician and Dentist independent contractors and private practices owners are looking for economic relief after the havoc incurred by Covid-19. The CARES Act offers 2 potential benefits for small businesses (under 500 employees) and self-employed individuals: the Economic Injury Disaster Loans / Grants (EIDL) and the Payment Protection Act (PPP). This article is a summary from the Small Business Administration (“SBA”) regarding the PPP with a more in-depth link from SBA attached. Under the PPP, Physician and Dentist private practices and independent contractors may be eligible for an unsecured loan for up to 2.5 times the average monthly payroll expense (capped at 100k total compensation per employee) over the previous year with a $10M maximum loan. Borrowers must make a good faith certification that the loan is necessary to support the business through the environment created by COVID-19 and that funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments and utility payments.
Borrowers may also be eligible for loan forgiveness for amounts spent during the 8-week period on: (i) rent, (ii) defined payroll costs, (iii) mortgage interest, and (iv) utilities, not to exceed the principal of the loan. The amount of the PPP loan forgiveness may be reduced if the borrower reduces the number of employees or salaries and wages during the 8-week period following the origination of the loan. However, this reduction penalty doesn’t apply to the extent the borrower restores their workforce count and salaries/wages by June 30, 2020. These loans are “first come first served” and so time is of the essence to submit applications. Small businesses can apply beginning April 3, 2020 and independent contractors and self-employed individuals can apply April 10, 2020.
- The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made;
- Employee and compensation levels are maintained.
When can I apply?
- Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
- Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
- Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program.
Where can I apply?
Who can apply?
What do I need to apply?
Do I need to first look for other funds before applying to this program?
How long will this program last?
How many loans can I take out under this program?
What can I use these loans for?
- Payroll costs, including benefits;
- Interest on mortgage obligations, incurred before February 15, 2020;
- Rent, under lease agreements in force before February 15, 2020; and
- Utilities, for which service began before February 15, 2020.
What counts as payroll costs?
- 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.
How large can my loan be?
How much of my loan will be forgiven?
- Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
- Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
- Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
How can I request loan forgiveness?
What is my interest rate?
When do I need to start paying interest on my loan?
When is my loan due?
Can I pay my loan earlier than 2 years?
Do I need to pledge any collateral for these loans?
Do I need to personally guarantee this loan?
What do I need to certify?
- Current economic uncertainty makes the loan necessary to support your ongoing operations.
- The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments.
- You have not and will not receive another loan under this program.
- You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting this loan.
- Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
- All the information you provided in your application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law.
- You acknowledge that the lender will calculate the eligible loan amount using the tax documents you submitted. You affirm that the tax documents are identical to those you submitted to the IRS. And you also understand, acknowledge, and agree that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.
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