Important Information About the Paycheck Protection Program (PPP)
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Over the last 48 hours, we have been speaking with top accounting firms and banks to understand how we can best help our WeddingPro community to easily and quickly access critical funds as part of the newly passed federal law, the CARES Act. Our ongoing commitment to you is that we will transfer the relevant information we learn in order to help our industry weather the storm during this crisis.
At this point, the most immediate action to take is to decide whether you are going to apply for the Paycheck Protection Program (PPP), a new potentially forgivable loan under the CARES Act available to businesses that have less than 500 employees (Good news: This includes sole proprietorships, independent contractors, and self-employed persons. Some businesses greater than 500 employees can also apply in certain circumstances). The amount of the loan is based on (and up to) 2.5 months of your average monthly payroll costs from the last year. While the loan is focused on maintaining payroll or rehiring people, it can also be used for mortgage interest, rent and utilities. More information, details, and guidelines on the PPP itself can be found at the US Treasury site here and the SBA site here.
The Takeaway – If you are Going to Act, Do it Today!
If you plan to apply for a PPP loan you should do so immediately to get placed into the queue as early as possible. Our sources tell us that the PPP loans are on a first-come-first-served basis and the sooner you apply, the sooner funds will be distributed.
Where do I apply for a PPP loan?
The SBA PPP loans will be offered through participating banks around the country, including most of the large national banks. You should contact your bank as soon as possible to see if they are participating in the PPP loan program. Applications are on a first-come-first-served basis, and you may be able to get a loan faster or with an easier application process if you go through your existing bank. A bank may not be able to process your application unless you are a customer and the new customer process could take some time.
If you bank with a large national bank (Chase, Bank of America, Capital One, Wells Fargo, Citibank, US Bank, PNC, TD Bank, BNY Mellon, etc), keep an eye out on any communications you may receive from them on how to apply. We encourage you to also check their website regularly, as many of them will be posting applications there in the next couple of days. If possible, contacting a local branch may also be a good way to gain a better understanding of how they intend to receive and process PPP applications.
If you bank with a local bank, check their website as well and try to: (1) verify that they are a bank that will be able to participate in the PPP, and (2) understand when and how they intend to service applications. Get in the queue as quickly as you can.
How much money can I get through a PPP loan?
PPP loan payouts may equal up to 2.5 times your average monthly payroll costs for the last 12 months (or shorter period if you’re a seasonal or new business).The loan is capped at a maximum of $10 million and payroll costs are capped at $100,000 per year per employee.
When calculating your payroll costs, make sure to include salaries, wages, tips and benefits paid to employees. If you’re a sole proprietor, independent contractor or self-employed, this could include your net earnings or business income.
Calculation cheat sheet: If you are a sole proprietor with $60,000 in business income in the last year, your average monthly payroll costs will be $60,000/12 = $5,000. If you apply for a PPP loan, then you would be eligible for up to 2.5 times that amount, or $12,500.
What is the process for applying for a PPP loan?
Each bank will put in place its own application process and you should check your lender’s website or contact them to get their application. As an example of what it may look like, the SBA recently provided a sample application here. It will be important to have your average monthly payroll costs (as described above), number of employees (if any) and documentation to support it on hand during the application process. You will also need to fill in some basic information about your business like your tax ID number, who owns your business, and how you plan to use the money.
The application will require you to certify that:
- The current economic uncertainty makes the loan necessary for ongoing operations
- The loan will be used for the permitted purposes (payroll, mortgage, lease, utilities)
- You have not and will not receive more than one PPP loan
- You will provide the lender with documentation verifying your number of employees, their payroll costs, mortgage interest payments, rent payments, and utilities for the 8-week period after getting the loan.
- All the information you provided in your application and supporting documents are true and accurate, and be consistent with the information you’ve provided to the IRS for tax purposes.
When can I apply?
Applications for small businesses (500 employees or fewer) and sole proprietorships will open on April 3, 2020. Independent contractors and self-employed individuals can apply starting April 10, 2020. However, it may be helpful to contact your bank now to get the process started as these loans are first-come-first served.
How can I stay up to date?
As you may have heard now, the US Stimulus package has many different facets and programs that could be beneficial to you during this time. At WeddingPro, we will continue to provide you with regular updates on the components of the plan to help keep you informed and up to date with any information we receive. Please stay on the lookout for additional information that we will be posting on the WeddingPro blog. There, you will find additional resources like our own PPP Loans FAQ (which is good to bookmark!), as well as information about our own Vendor Assistance Program.
Our team at WeddingPro remains committed to helping you take advantage of all the small business assistance resources and information relevant to our industry so you can maximize the benefit to your business.
Disclaimer: In these blog posts, we provide information from trusted sources and government agencies as it becomes available. Please check the links we provide and these blogs regularly as the information we receive is changing quickly. We can’t provide you legal, financial or tax advice so please check with your advisors to make sure that any action you take is the best one for you.
Photo Credit: shutterstock.com/nuwatphoto
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