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Paycheck Protection Program Flexibility Act signed into law

SBA Paycheck Protection Program icon

WASHINGTON –SBA Administrator Jovita Carranza and U.S. Treasury Secretary Steven T. Mnuchin issued the following statement today following the enactment of the Paycheck Protection Program (PPP) Flexibility Act:

“We want to thank President Trump for his leadership and commend Leader McConnell, Leader Schumer, Speaker Pelosi, and Leader McCarthy for working on a bipartisan basis to pass this legislation for small businesses participating in the Paycheck Protection Program.

“We also want to express our gratitude to Chairman Rubio, Ranking Member Cardin, Senator Collins, Congressman Roy, Congressman Phillips, and other members of Congress who have helped to create and guide our implementation of this critical program that has provided over 4.5 million small business loans totaling more than $500 billion to ensure that approximately 50 million hardworking Americans stay connected to their jobs.

“This bill will provide businesses with more time and flexibility to keep their employees on the payroll and ensure their continued operations as we safely reopen our country.

“We look forward to getting the American people back to work as quickly as possible.”

Upcoming Procedures

SBA, in consultation with Treasury, will promptly issue rules and guidance, a modified borrower application form, and a modified loan forgiveness application implementing these legislative amendments to the PPP.  These modifications will implement the following important changes:

Extend the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan forgiveness.  Borrowers who have already received PPP loans retain the option to use an eight-week covered period.

  • Lower the requirements that 75 percent of a borrower’s loan proceeds must be used for payroll costs and that 75 percent of the loan forgiveness amount must have been spent on payroll costs during the 24-week loan forgiveness covered period to 60 percent for each of these requirements. If a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.
  • Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020, due to compliance with requirements or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to worker or customer safety requirements related to COVID–19.
  • Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were employees of the borrower on February 15, 2020, and unable to hire similarly qualified employees for unfilled positions by December 31, 2020.
  • Increase to five years the maturity of PPP loans that are approved by SBA (based on the date SBA assigns a loan number) on or after June 5, 2020.
  • Extend the deferral period for borrower payments of principal, interest, and fees on PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).
  • In addition, the new rules will confirm that June 30, 2020, remains the last date on which a PPP loan application can be approved.

Joint Statement by SBA Administrator Jovita Carranza and Treasury Secretary Steven T. Mnuchin on the Resumption of the Paycheck Protection Program

WASHINGTON – Administrator of the U.S. Small Business Administration Jovita Carranza and U.S. Treasury Secretary Steven T. Mnuchin issued the following statement today on the resumption of the Paycheck Protection Program (PPP):

“We are pleased that President Trump has signed into law the Paycheck Protection Program and Health Care Enhancement Act, which provides critical additional funding for American workers and small businesses affected by the coronavirus pandemic.  We want to thank Leader McConnell, Leader Schumer, Speaker Pelosi, and Leader McCarthy for working with us on a bipartisan basis to ensure that the Paycheck Protection Program is funded so that small businesses can keep hardworking Americans on the payroll.

“The Small Business Administration will resume accepting PPP loan applications on Monday, April 27 at 10:30AM EDT from approved lenders on behalf of any eligible borrower.  This will ensure that SBA has properly coded the system to account for changes made by the legislation.

“The PPP has supported more than 1.66 million small businesses and protected over 30 million jobs for hardworking Americans.  With the additional funds appropriated by Congress, tens of millions of additional workers will benefit from this critical relief.

“We encourage all approved lenders to process loan applications previously submitted by eligible borrowers and disburse funds expeditiously.  All eligible borrowers who need these funds should work with an approved lender to apply.  Borrowers should carefully review PPP regulations and guidance and the certifications required to obtain a loan.

“The Trump Administration is fully committed to ensuring that America’s workers and small businesses continue to get the resources they need to get through this challenging time.”

For more information on the Paycheck Protection Program, visit: sba.gov/paycheckprotection.

10 steps to understanding the Paycheck Protection Program

An NTCA perspective on the CARES Act for companies with fewer than 500 employees

NTCA has been reviewing details as relates to new legislation enacted as a response to the COVID-19 crisis, and how it impacts our members and the tile industry at large.

This piece is an NTCA perspective on the Paycheck Protection Program aspect of the CARES Act and how members and small businesses can best take advantage of what is currently being offered by the government. Keep in mind that even though legislation has been passed, some details continue to change, and lenders are struggling to meet all the demand suddenly flooding in for loans. Your experience in applying for loans and the amount of time it takes you to receive funds may vary.

The CARES Act is over 830 pages long and has 16 laws attached to it.  The main item we want to focus on involves the Paycheck Protection Program (PPP), which helps businesses keep their workforce employed for eight weeks during the Coronavirus outbreak.

This is also a potentially forgivable loan if you follow the guidelines. The SBA stipulates that at least 75% of the PPP loan must be used for payroll. 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.

The following steps can help you know what to expect as you navigate through the labyrinth of applying for a loan, obtain funds, and qualify for the forgivable loan status. This latter point is doubly important since loans that are forgiven – or portions of loans that are forgiven — are not counted as taxable income. 

  1. Call Your Bank
    • Ensure your bank is FDIC-insured and is approved to handle SBA loans and is able to handle PPP application.
    • There is only $350 billion available in the PPP coffers so get your application in as quickly as possible.
    • This is a fluid situation.  The banks are on the front lines and are trying to navigate uncharted waters.
    • Most banks are only working with customers they currently do business with.  This is because there is a limited amount of money and they want to take care of their customers first.
    • Once applications are submitted, they are assembled into a queue for the banks to sort out. This could take up to 10 days. Once submitted for approval, it could take up to 30 days for the funds to be deposited into your account.
  2. Go To Treasury Department for Information
    • http://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses
    • You can access a fact sheet on PPP loan application form and get a downloadable form that may or may not be accepted by your lender. The advantage of accessing this form is that it will help you compile the information you need whether you use the SBA or lender form.
    • The program application process is open to June 30. Due to limited funds, it is to your benefit to start this process as soon as possible.
    • April 3rd was the date that many banks opened application process for small businesses. 
    • April 10th is the date that independent contractors and self-employed individuals can apply.
    • Go to www.sba.gov for more information
  3. Check your company governance requirements and other lending commitments to ensure there is not a problem in applying for this loan
    • The SBA form requires all owners with 20% stake or more in the company to answer questions on the loan (examples include bankruptcy, have they ever been barred or declared ineligible by any federal department or agency, have they been convicted of a felony, etc.)
  4. Calculate your payroll expenses
    • To qualify for forgivable loan status, the amount you can borrow is 2.5 times your average monthly payroll from the previous year (2019).
    • Payroll costs include salaries, wages, commission, tips, vacation, PTO, health care benefits, retirement benefits, state and local taxes. Payroll costs in the loan calculation do not include federal taxes.
    • There is a cap on payroll for an employee making over $100,000 in 2019.  You can only claim $100,000.  That is salary; benefits are not counted. For example, an employee made $140,000, but you would only claim $100,000 when you calculate your payroll for the loan. 
  5. How much are you eligible for? Add average total monthly payroll and divide by 12. Then multiply by 2.5. 
    • If you already applied for or were awarded an SBA Disaster Loan, you can add that amount to the PPP application. Note that the PPP loan has restrictions on how you spend the money. 
    • SBA Disaster Loans allow more freedom with how you use the loan money, but may not be forgivable, are subject to underwriting, and require personal guarantees attached to it. Visit sba.gov for details.
  6. Document and keep excellent records of paperwork used in your application
    • Print and electronically store your records and have them available for submission if the bank requires these material or if the federal government later checks for fraud or misuse.
  7. Sign a certificate
    • All owners with 20% stake will be asked to sign a statement certifying the funds are necessary and will be used for what the loan stipulates: to maintain or to hire staff back that was let go after February 15th, 2020.  
    • No collateral or personal guarantees will be required for these funds.
    • This loan has a maturity of 2 years and an interest rate of 1% should it need to be paid back. However, funds should be forgivable if you document your paperwork, keep honest and thorough records, and use the money for what the PPP is designed for within the 8-week time frame.
  8. Make sure you use the funds for authorized purposes
    • 75% needs to be used for payroll which includes costs related to group health care benefits and insurance
    • Payments of interest but not principal on any mortgage obligation
    • Rent (including rend or lease agreements)
    • Utilities
    • Interest on any other debt like equipment, vehicles, etc.
    • Keep funds segregated into a designated account and use the funds to document a paper trail for the authorized uses listed above.
  9. Understand the impact of your past and possible future firings or layoffs of employees, or reduction or furloughs in their salaries.
    • The PPP is designed to encourage employee retention and discourage layoffs and wage cuts. If you need to do massive amounts of layoffs or cuts, reconsider applying for PPP and investigate a different loan option at sba.gov.
    • Talk to your accountant and lawyer about other tax credits or employee retention credits that may be available apart from the PPP loan.
  10. Keep up to date on changes or interpretations to the law. 
    • This is a very fluid situation, and things can change.
    • Get legal and accounting advice and establish communication with your banker. 

We will continue to post salient articles on legislation topics here. Also be sure to visit the Coronavirus Resource Page at tile-assn.com for links and ongoing information, designed to support you and your business.