We have been in communication over the last several days about the Paycheck Protection Loan Program that is available as part of the CARES Act. This article is a follow up on what we discussed and to provide the tools we have developed to assist you. We recommend that you reach out to your bank immediately if you haven’t already and begin to provide the necessary information that they request.
In the meantime, we wish to provide some guidance which may be of assistance to you. Below are 4 documents:
- A notice from the U.S. Treasury Department Office of Public Affairs. They are indicating that this program is ready to roll out and they are ready to start lending the money starting Friday, April 3rd.
- A spreadsheet tool we have created to help employers calculate the amount of the loan available to them based on prior payroll costs. Calculation of loan will be made by taking an average monthly salary expense (and benefits) calculated by 2.5%. The determination of the average monthly salary expense will be made by using 2019 numbers or a 12 month rolling period. (IMPORTANT: which method to use is being debated – we are hearing conflicting information and are awaiting guidance on that determination.)There is also a tab which describes the information that some (not all) banks have indicated they will require. You will want to get direct guidance from your bank regarding this, we only provide as information to assist you if you want to get a head-start.
- The PDF application document is directly from the SBA program and is the application we are being told will be required to be completed when you go to apply with your bank for a loan. We are providing this so you can get started on that process as well.
- The PDF borrower information document is information for borrowers that we felt would be helpful to you as you work through this process. It is VERY important that you read this in conjunction with completing the application.
Finally, each bank may require additional source data to support your applications so please work directly with your banking relationships for those specifics.
Based on the SBA form that came out today and a discussion with an official close to the source, as well as new information released from the US Treasury, we have learned some new information which is different or in contradiction to the way the original bill read:
- Based on guidance from the SBA and their instructions, the loan determination period appears to allow a calendar year 2019 calculation to determine average wages (despite what the legislation states).
- The term of the unforgiven portion of the loan was changed (from 10 to 2 years). The interest rate changed from 4% to 0.5%.
- Clarification that compensation over $100,000 to be excluded per employee is on “an annualized basis”. This is also defined in the definitions tab. (for example, an employee who worked for 6 months and made $80,000 should have an exclusion adjustment of $30,000).
- There is still inconsistency within different banks (and we are receiving conflicting information from government officials) of whether 1099’s for 2019 independent contractors that would otherwise be an employee of your business qualify for determination of the loan amount and forgiveness. We recognize that this may be important to you and are hoping to receive a definitive answer over the next day or so. In the meantime, we recommend that you work with your financial institution to get their interpretation since they will ultimately approve the loan.
This is all moving very fast (the above guidance was released yesterday) and our team is diligently working to stay on top of it and to help you stay on top of it. We apologize in advance if anything changes along the way but we feel the urgency to get this information out to you now so you can get started.
Thank you for trusting in HSC to assist you as we work through these difficult and uncertain times together.
For more information, contact Scott Touro, MBA at firstname.lastname@example.org.