Paycheck Protection Program FAQ’s
We have been on the phone with a lot of small business owners and independent contractors discussing their Paycheck Protection Program (PPP) loans. Here are a few of the questions we are hearing most often:
Question: My bank won’t take an application from me. So where can I apply?
Answer: There are essentially 3 options: (1) large bureaucratic banks, (2) community banks and credit unions, and (3) non-bank SBA lenders. It’s a shame that some of the “too-big-to-fail” banks are choosing only to do business with their “better” customers. A lot of business owners are left feeling invisible and unimportant. We have been able to introduce clients to credit union lenders that do not require a pre-existing relationship. And we soon expect to have a direct line to one of the largest national, non-bank SBA lenders in the country.
Question: As a business owner, can I include the distributions I give myself in my calculation of “payroll costs” when determining my “average monthly payroll” on my PPP loan application?
Answer: No – unless you paid payroll taxes or self-employment taxes on those distributions. However, most small business owners are not set up that way.
Question: As an employer, are taxes included in “payroll costs” when calculating my “average monthly payroll” on my PPP loan application?
Answer: Per the U.S. Treasury: “[P]ayroll costs are not reduced by taxes imposed on an employee and required to be withheld by the employer, but payroll costs do not include the employer’s share of payroll tax. For example, an employee who earned $4,000 per month in gross wages, from which $500 in federal taxes was withheld, would count as $4,000 in payroll costs. The employee would receive $3,500, and $500 would be paid to the federal government. However, the employer-side federal payroll taxes imposed on the $4,000 in wages are excluded from payroll costs under the statute.”
Question: What time period should I use to determine my payroll costs to calculate my maximum loan amount?
Answer: If you were in business throughout all of 2019, and your business is not “seasonal”, then you have a choice: Use your payroll data from the previous 12 months (e.g., April 2019 through March, 2020) or from calendar year 2019 (January, 2019 through December, 2019). Although those numbers may be very similar, it could make a difference in the amount you are eligible to borrow if you took on additional employees in late 2019 or early 2020. For seasonal businesses, use your average monthly payroll from February 15, 2019 through June 30, 2019. If you were not in business from February 15, 2019 to June 30, 2019, then payroll costs for January 1, 2020 through February 29, 2020.
Information is changing daily. We are staying on top of these developments as best we can so we can bring them to you in a timely and valuable way. Please call us with any questions or assistance with your PPP loan application.