The Treasury Department on April 7 issued a document entitled “Payroll Protection Program Loans Frequently Asked Questions” (the FAQ). The document, while not bearing the force of law or official regulation, states that “[b]orrowers and lenders may rely on the guidance provided in this document as SBA’s interpretation of the CARES Act and of the Paycheck Protection Program Interim Final Rule (“PPP Interim Final Rule”).” The guidance answers some of the many questions arising out of the program, such as: how to calculate the amount that can be borrowed, whether companies that use payroll leasing services may apply for PPP loans, what time period should be used to determined the average monthly payroll and more. The guidance also assures banks that they are permitted to rely on borrower calculations and may use their own portals to collect the data required by the SBA’s standard application, and may rely on the signature of a single “authorized representative” of a business with multiple owners. (FAQ 11, 13).
What time period do I use to calculate average Monthly Payroll?
This is some of the most welcome guidance, because the application says use 2019 data, while the statute seems to say use the last year’s data. The FAQ says a business may rely on either time period in making its request. Seasonal businesses may calculate from Feb 15, 2019 or March 1, 2019 to June 30, 2019, and businesses not in business between Feb 15, 2019 and June 30, 2019 may use Jan-Feb 2020 numbers instead. (FAQ 14)
What about Independent Contractors?
Payments made to contractors should not be included in the average monthly payroll calculation. Contractors may apply for their own PPP loans, starting April 10. (FAQ 15)
What if I already applied?
Borrowers who applied before this most recent guidance came out are not required to revise their applications, but are permitted to do so if the clarification would benefit them. (FAQ 17).
Are funds still available?
For now, yes. There’s a lot of panic about whether the funds will be available, with banks like Bank of America announcing it will only open the program to business credit customers (shutting out long-term businesses who operate without a business loan) after receiving $22.2 Billion in applications, and and Well Fargo announcing it will not take any more applications. Don’t panic. Remember, the original appropriate was approximately $340 Billion, and the SBA has just started approving applications. Moreover, Congress is in talks as we speak to provide upwards of $200 billion more in funding for the PPP program. A “clean” application is more likely to get approved than one that is incomplete. Make sure you have good guidance on how to prepare your application.
Florida Won’t Tax PPP Loans
Also today, Florida’a Governor issued Executive Order 20-95 [.pdf], which states that Florida will not issue document stamp taxes on PPP loans. One less tax to worry about.
Remember, the landscape is changing daily, so this information is correct as of April 7, 2020 when posted, but may not be fully correct even days later. Be sure to subscribe to our newsletter and bookmark our COVID UPDATES page. In addition, be sure to join our e-mail list for COVID-19 Relief News.