Posted on April 1 2020
Coronavirus Update 4/1/20
EMERGENCY UPDATE — Wednesday, April 1 —
To our clients:
With each passing day, more details are released regarding the two programs being offered by the Small Business Administration (SBA) to provide financial assistance to small businesses. Yesterday’s Coronavirus Update (March 31, 2020) provided an overview of these programs, as well as links to the SBA website and other resources.
One of the concerns that many of you expressed was the fact that any potential loan forgiveness under the Paycheck Protection Program (PPP) was predicated on meeting certain requirements by June 30, 2020. The SBA has now clarified that loans through the PPP are available through June 30, 2020. Once a PPP loan is approved and funded, the recipient business will have an 8-week period to use the loan proceeds for designated purposes.
Other details or clarifications include:
• Lenders will begin processing applications on Friday, April 3, 2020. Independent contractors and self-employed individuals can begin applying on April 10, 2020.
• Applicants will need to certify that the loan is necessary because of economic uncertainty caused by COVID-19. The ultimate decision regarding eligibility (i.e. need) for these SBA loans will be made by your SBA-approved lender based on SBA regulations. These regulations should be released in the coming days.
• The definition of payroll costs (which are used to determine the maximum PPP loan amount) includes payments made by the borrower to independent contractors (at an amount not to exceed $100,000 each).
• Loan proceeds can be used for any business expenses; however, potential loan forgiveness is determined by how much you spend on the forgivable expenses described in previous alerts – payroll, mortgage interest, rent, utilities, and interest on business loans that were in place on as of February 15, 2020. Due to the expected high demand for this program, at least 75% of the forgiven loan must be used for payroll costs.
• Until the loan is formally forgiven, in whole or in part, the loan will bear interest at .5%, and all borrowed funds will be payable in two years.
• Once some or all the loan has been forgiven, any amount not forgiven will convert to the 10-year, 4% loan as explained in previous alerts.
We will continue to keep you updated as more details become available.
MillerSearles LLC | Certified Public Accountants | Advisors