April 3 is the first day lending institutions can begin processing loan applications for the Paycheck Protection Program. The PPP is a new Small Business Administration loan established by the $2 trillion federal Coronavirus Aid, Relief and Economic Security Act—also known as the CARES Act—which was signed into law by President Donald Trump on March 27.
Of the more than $2 trillion, $376 million is dedicated to relief for American workers and small businesses, according to the SBA’s website.
The Fort Bend Chamber of Commerce hosted a webinar April 2 with banking and tax professionals for business owners in the community to learn about relief funding, including the PPP.
“The primary intent for the PPP is to make sure [businesses] can continue to pay their payroll and operating expenses for an eight-week period subsequent to the implementation of funding,” said Mickey O’Neal, a CPA at DRDA in Houston.
Other panelists included Doug Dickey, who is also a CPA at DRDA; Jevaughn Sterling, a senior vice president at Amegy Bank; and Jonathan Pursch, a senior vice president at Frost Bank.
Pursch said the SBA is still working out the details of the plan and issuing guidance to lenders on how to process loan applications.
Kevin Riles, the chamber’s business and profession division chair, who moderated the webinar, said the chamber plans to host another webinar on the same topic in two weeks once there is more clarity on the program.
Community Impact Newspaper sat in on the webinar in order to share answers to frequently asked questions related to the PPP. Quotes from the chamber’s presentation have been edited for length and clarity.
Which businesses are eligible to apply?
“So you're eligible, generally, if you are a small business with fewer than 500 employees,” Sterling said. “There are a few exceptions that have already been identified for some companies and industries. In food accommodation services, that 500 rule can be applied per physical location. We're also aware of several other exclusions being provided to manufacturers. If you're an individual who operates as a sole proprietor, you're also eligible, and an individual that operates as an independent contractor is also eligible.”
Pursch said the majority of businesses in America are under 500 employees and meet the required criteria.
“We're not discouraging anyone from applying because most businesses are adversely impacted by the coronavirus and would need these funds,” Pursch said. “So most businesses are going to be eligible to apply.”
How much will a PPP loan be for?
“The question is, 'How much can I borrow?'” O’Neal said. “The borrowing amount is based on average compensation, the baseline being two-and-a-half times your average monthly payroll. It says 'not to exceed $10 million'—that's a very specific provision.”
O’Neal said for nonseasonal employers that have been in business since before 2019, the maximum loan amount is two-and-a-half times their average monthly payroll cost in 2019. For newer business, the maximum loan amount is two-and-a-half times their average monthly payroll costs for January and February of this year.
Loan calculations for seasonal businesses differ slightly, with the loan amount equaling two-and-a-half times the average of monthly payroll costs for a 12-week period beginning Feb. 15, 2019, or March 1, 2019, and ending Jun 30, 2019.
How do you get the loan forgiven?
In order for businesses to be eligible for loan forgiveness, Sterling said, employers must keep all employees on the payroll for an eight-week period starting when the business receives the loan. Additionally, O’Neal added that there are very specific guidelines for what loan money can and cannot be used for.
“You are eligible for loan forgiveness if the proceeds of the loan are used for specific items during the eight-week period starting on the date of the origination of the loan,” O’Neal said. “Those costs are essentially payroll costs: This could be rent; this could be utilities; this could be bonuses to replace tips for people in the entertainment industry.”
What steps do I need to take in order to begin applying?
“What you can start doing over the weekend, while we're waiting for application details to be available, is gather your payroll statements and submit them to the bank so we can review them, help you calculate the loan amount and then, apply directly to the SBA for the approval.”
More information about the specifics of the PPP is available on the SBA website.