Updated April 3 – We wanted to check in as a follow up to the communication that you have had with the LGA Cares Team. Things have been coming at all of us fast and furious, and things have been changing daily. Most business owners have been focused on the Paycheck Protection Program this past week or so and understanding the program to ensure they can timely submit an application.
We wanted to update you on somethings that we have learned along the way; some of this may have been already discussed with you, but we just wanted to ensure we are covering the bases with everyone.
- The SBA has released the PPP application and some guidelines for the banks, who will be processing all PPP applications on behalf of the SBA. Businesses and sole proprietorships can apply on April 3rd and independent contractors and self-employed individuals can file on April 10th.
- You can file for both the EIDL and PPP loan programs, as long as the proceeds from each loan are not used for the same purpose. The EIDL application can be filed online directly with the SBA. The EIDL will also provide a grant up to $10,000 that will be funded within 3 days, which will be forgiven, even if the application for an EIDL is declined.
- Because banks are overwhelmed with the volume of applications that they must process for their existing banking clients, most banks will NOT be processing applications for the PPP for nonbank clients, or will only process those applications once they have processed applications for all other clients.
- The application for the PPP is based on payroll costs, as defined. Amounts paid to independent contractors or self-employed individuals DO NOT count and should not be included with a business’ application for a PPP loan; they will apply separately for this program on their own.
- The original bill for PPP suggested the applicable payroll to include in the application was for the 12 months preceding the application date; assuming an application date of April 1st, this resulted in Q2-Q4 2019 and Q1 2020. It is expected that the amounts that you report are to be supported by Federal Forms 940/941. Since the Q1 2020 form would not be ready timely, the SBA has indicated that most businesses will apply using the full calendar year 2019 payroll. Our estimating tool has been updated to reflect this. However, your bank could still require Q2-Q4 2019 and Q1 2020.
- We believe that the supporting documents that most banks will request to support a PPP application consist of:
- IRS Form 940 and 941’s for 2019
- A payroll summary report for the twelve months of 2019, as well as for payroll period closest to February 15, 2020 to establish you were operational at that date
- An itemization of how you will use the funds that reconciles to the amount you are requesting under the program; this should be broken down by the following categories – utilities, payroll costs, mortgage interest payments, rent, refinance eligible EIDL, health insurance premiums and interest on debt incurred prior to 2/15/2020
- Documentation to support the health insurance premiums that you paid for 2019
- Documentation to support the retirement benefit costs that you paid for 2019
- Trailing 12-month Profit and Loss Statement (as of the date of application) month by monthand one for calendar year 2019
- Balance sheet as of 12/31/2019
- Most recent mortgage statement or rent statement (lease) for the period evidencing you were operational on February 15, 2020
- Utility bills for the period evidencing you were operational on February 15, 2020 (electric, gas, telephone, internet, water)
- Confirmation of your NAICS Code
- Some banks may also request copies of tax returns and other financial information, yet to be determined
We hope that this additional information clarifies any questions that you may have still had leading up to the filing of your PPP application. If the LGA Cares Team can be of any further assistance to you, including calculating your loan estimation, please contact us at lgacares@lgallp.com and a member of our team will get back to you.
