More info on the Paycheck Protection Program

The US Treasury published this website yesterday providing more information about the Paycheck Protection Program. The PPP is a program administered by the Small Business Administration that provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities

The key feature of this program is that the loans can be forgiven if certain criteria are met. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.  An excerpt from the UST fact sheet regarding loan forgiveness:

You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.

You will also owe money if you do not maintain your staff and payroll.

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

Business owners can either use the PPP or they can use the employer retention credits but you cannot use both. More guidance on both programs should be coming soon.

The Paycheck Protection Program is not a Tax-related provision, thus we are not experts at this program and unable to provide advice on the PPP.  We recommend you speak to your attorney to understand how this program will impact you.

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