Updated: Apr 5, 2020
There are so many questions about the new Paycheck Protection Program (PPP). The purpose of this blog is to provide you with information I am learning as I am going through the educational process about this new program. This is not legal advise. I am simply sharing information that I have learned.
First, lets start with the purpose of the PPP. This funding is coming from the private sector, with guidelines designated from the bill. This is a new, never done, process. The PPP states that the loans will be forgiven if the funds are used for the appropriate purpose. The money needs to be used for approved categories and if it is it should be forgiven by the government. The goal appears to be that if you use the monies received for the correct purposes, payroll, rent, utilities to run your business, you will have the funds used for those purposes forgiven and all funds not used for those purposes will be paid back by you at the loan rate agreed upon but no higher than 4%. Please note, no more than 25% of the funds can be used on rent, utilities, rent (expenses outside of payroll).
What do you need to do first when you are trying to get the PPP process started?
- Figure out the bank you want to use
- Determine if you want to use a third party to assist you with the loan process
What do you need to get ready to start the application process?
Step 1: Calculate payroll: wages to employees over 12 month period. Feb 1- March 31.
· Can include salary
· Reduce employees who earned more than 100K down to 100K
· Draws up to 100k
· Put in spreadsheet
· Might want to consider applying for slightly less (90%) of the total amount
Step 2: contact your third party or bank that you want to work with and ask what documentation they need/want
Step 3: Gather additional information about your entity
· Front and back of drivers license of any owner of the company
· Articles of Incorporation
· Operating Agreement/Bylaws
· Meeting Minutes
Need help with any of this? A. L. Harvey Law can help with business documents.
Remember, a major goal of this program is to provide funding to PAY YOUR EMPLOYEES. That is why payroll is the main source of documentation necessary to determine the amount you will qualify for. You need to maintain your employee base and provide them with almost the same salary or the same salary as they were receiving before to qualify for your debt forgiveness. There is some very slight leeway in this, but not much, so be cognizant of this.
The PPP program is changing all the time. Applications changed overnight from yesterday to today. Make sure you document all of the information you are relying on and ONLY obtain information that you rely on from a reliable source ie: SBA. EX: This blog would not be a reliable source that you rely on because it is not legal advise. One idea for the collection of this information would be to create a gmail account where you email all relied upon information to that account, email any documentation you create and your loan application etc. This way if your computer crashes you will still have the documentation and a timestamp of when it was relied upon or generated. Another idea is to create a folder and put all information in that folder but make sure you back it up on a different source ie: Dropbox; Google Drive. The purpose of saving this information is to justify your spending if you are ever called into question, based on the rapidly changing information.
There is question about when the funds must be used by, but one school of thought is the funds that would qualify to be forgiven must be used within a 8 week period after the funds are given.
The most important, after receiving the funds, for the purpose of making sure you get the funds forgiven, is to ensure you that you can prove that you only spent the funds on the approved categories. An idea to ensure that is to put the funds into a separate account and only pay the approved categories out of that account.
Like I always say. DOCUMENT, DOCUMENT, DOCUMENT! Make sure you keep clean records about your workforce, what you are spending this money on and justification for your spending.
If you need assistance with documents related to your business such as your annual meeting minutes, bylaws, operating agreement, shareholders agreement, employment agreements or any other documentation you need about your business please contact us at firstname.lastname@example.org or call us at 530-217-3520.
If you are looking for more resources regarding this topic or all things COVID-19 related the Auburn Chamber of Commerce has some great resources on their website.
Remember, the above information is not legal advise. I am providing the above information as a courtesy from seminars I have attended. Do not rely on this as legal advise. Reading this does not create an attorney/client relationship. This is an attorney advertisement.