CARES Act Paycheck Protection Program Update 

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On April 24, 2020, President Trump signed into law the Paycheck Protection Program and Health Care Enhancement Act, authorizing an additional $310 billion to the Paycheck Protection Program (“PPP”) created under last month’s federal Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).  Please find Cox, Castle & Nicholson’s summary of the PPP program, here.  The additional $310 billion provides much needed additional funding for the PPP, after the initial $349 billion authorized for the program was depleted within a mere 14 days.  As of this writing, the Small Business Administration (“SBA”) is not accepting new applications for PPP loans, and SBA lenders are sitting on a backlog of unprocessed applications from the first PPP application round.  Eligible small businesses should expect a very short window of opportunity, if any, to file new applications for additional PPP awards.

Some practical suggestions for qualified businesses and individuals seeking to submit applications for new PPP funds:

  • Identify your SBA lender.  PPP loans are funded and administered by registered SBA lenders.  Ask your existing lender if it is an SBA lender, and pursue your PPP application through your existing lender if at all possible.
  • Follow the rules:  Be careful to follow the PPP loan application rules in calculating your requested loan amount, and ensure that your payroll documentation supports your calculation.  For example, you must exclude compensation of an individual employee in excess of an annual salary of $100,000 when calculating your qualified payroll costs, you must exclude compensation of employees whose principal place of residence is outside of the United States, and you may include compensation to part-time employees.  Having your PPP loan application numbers cleanly supported by documentation will help minimize additional inquiries by your PPP lender that can cause delays in processing your application.
  • Read the latest guidance:  The U.S. Department of Treasury and the SBA continue to update their FAQ for the PPP, with the most recent update posted yesterday (April 23).  The FAQ provides much-needed clarification on a number of issues.  The FAQ can be found on the Treasury’s website (here) and on the SBA’s website (here), along with other important PPP information.
  • Latest guidance, continued:  Employee Issues:  Business entities generally must have employees in order to qualify for the PPP.  However, if your business is financially responsible for employees under a separate management arrangement (such as a payroll provider or a Professional Employer Organization), you may still qualify.      
  • Latest guidance, continued:  Affiliation Rules:  The PPP application requires disclosure of affiliate relationships for the applicant and the applicant’s main owners.  Applicants should identify any affiliate relationships that may need to be explained in the application.  SBA has provided some guidance to assist applicants in preparing the appropriate disclosures, available on the SBA’s website, linked above.

Cox, Castle & Nicholson’s COVID-19 task force has provided technical assistance and advice to many of the firm’s clients seeking to file PPP applications.  Please feel free to contact us to discuss your PPP questions.

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