On Friday April 3, the SBA modified the PPP loan application for a third time, and if your client had previously prepared an application using the older version, it must be resubmitted-the link is in my summary below. Similarly, no one has yet received the$10,000 grant that was supposed to be paid within 3 days of application. On April 2 the SBA released more interim guidance which did not become available until April 3rd. On April 4th the SBA changed their website to reflect the advances will be paid in about a week.


PPP Loans-SBA Interim Guidance April 2

Businesses eligible for the up to $10 million PPP loan include those with 500 or fewer employees with a principal place of residence in the United States, or other businesses, including 501(c)(3) entities in certain industries that meet applicable employee-based standards.

The businesses must have been in operation on February 15, 2020, and must have paid employee salaries and payroll taxes or independent contractors on a Form 1099-MISC.

The interim rules also state that independent contractors don’t qualify as employees under the program because independent contractors and sole proprietors can apply for the loans on their own.

Illegal activities, household employers, current/previously delinquent SBA loans, and businesses who are owned 20% or more by people in jail, probation, parole, indictment or conviction of a crime in the last five years are also not eligible.

Under the loan program, the lesser of $10 million or a specified amount under a payroll-based formula can be borrowed. The formula is mechanical, and the interim rules explain how it works:

From the aggregate payroll costs for the last 12 months, subtract compensation in excess of an annual amount paid of $100,000, divide that amount by 12, and then multiply the average monthly payroll costs by 2.5. Then add any EIDL loans made between 1/31/20 and 4/3/20 and subtract any EIDL advance.

But the benefit is that the loan can be forgiven if at least 75 percent of the proceeds are used for payroll costs in the eight-week period after the loan was made and if employee and compensation levels are maintained.

The maturity date of the loan is two years under the interim guidance, even though the law granted ten years. Prepayments are allowed. Payments will begin six months after disbursement, although interest will accrue during that time period. The amount of money available is limited and is supplied under a “first come, first served” rule.

The amount of loan forgiveness can be up to the full principal amount of the
loan and any accrued interest. That is, the borrower will not be responsible for any loan payment if the borrower uses all of the loan proceeds for forgivable purposes described below and employee and compensation levels are maintained.

The amount of loan forgiven IS NOT TAXABLE-citation is in the 45 Q&A recording link above,

The actual amount of loan forgiveness will depend, in part, on the total amount of (1) payroll costs, (2) payments of interest on mortgage obligations incurred before February 15, 2020, (3) rent payments on leases dated before February 15, 2020, and (4) utility payments under service agreements dated before February 15, 2020, over the eight-week period following the date of the loan. However, not more than 25 percent of the loan forgiveness amount may be attributable to non-payroll costs.

Use SBA Form 2483 (version 3 re-designed 4/3/20) to apply, and if the taxpayer applied with an earlier version, re-submit using the new version. The loan may be used for:

  1. Payroll costs

  2. Group health care benefits

  3. Mortgage interest (but not principal)

  4. Rent and utility payments

  5. Interest on any debt from before 2/15/20

The borrower will have to document these costs for the lender at the end of 8 weeks to apply to the lender for loan forgiveness.

We are being told that lenders are asking for the following items. Use them as a checklist so you only submit once:

  1. Latest PPP application,

  2. Articles of incorporation or organization,

  3. Bylaws or operating agreements of entity,

  4. 2019 and 1st quarter 2020 (if completed) 941’s, 940, state withholding and even state unemployment forms (and no, I don’t understand this either),

  5. Bank statements from 1/2019 through and including 2/2020,

  6. 12 month trailing P&L,

  7. Payroll summary reports

    • Include documentation of health insurance premiums paid

    • Include documentation of pension benefits paid to administrator

    • Breakdown of payroll if vacation, dismissal, health care and/or retirement

  8. Current identification for the borrowers

You should contact your bank to ask them about the documents they are requesting from applicants.


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