Payment Protection Program (PPP) Loans Q & A

Words: Bronzella Cleveland

The MCAA has pulled this information from the SBA site to help answer questions about the PPP program.  For further details about other programs offered through the SBA go to the MCAA site and find resources for COVID 19:   

https://www.masoncontractors.org/2020/03/25/covid-19-coronavirus-comprehensive-resource-list

The program would provide cash-flow assistance through 100% federally guaranteed loans to employers who maintain their payroll during this emergency. If employers maintain their payroll, the loans would be forgiven, which would help workers remain employed, as well as help affected small businesses and our economy to snap-back quicker after the crisis. PPP has a host of attractive features, such as forgiveness of up to 8 weeks of payroll based on employee retention and salary levels, no SBA fees and at least six months of deferral with maximum deferrals of up to a year. Small businesses and other eligible entities will be able to apply if they were harmed by COVID-19 between February 15, 2020 and June 30, 2020. This program is would be retroactive to February 15, 2020, in order to help bring workers who may have already been laid off back onto payrolls. Loans are available through June 30, 2020. 

How is the loan size determined?  Depending on your business’s situation, the loan size will be calculated in different ways (see below). The maximum loan size is always $10 million. 

• If you were in business February 15, 2019 – June 30, 2019: Your max loan is equal to 250 percent of your average monthly payroll costs during that time period. If your business employs seasonal workers, you can opt to choose March 1, 2019 as your time period start date. 

• If you were not in business between February 15, 2019 – June 30, 2019: Your max loan is equal to 250 percent of your average monthly payroll costs between January 1, 2020 and February 29, 2020. 

What costs are eligible for payroll? 

• Compensation (salary, wage, commission, or similar compensation, payment of cash tip or equivalent) 

• Payment for vacation, parental, family, medical, or sick leave 

• Allowance for dismissal or separation 

• Payment required for the provisions of group health care benefits, including insurance premiums 

• Payment of any retirement benefit 

• Payment of State or local tax assessed on the compensation of employees 

What costs are not eligible for payroll? 

• Employee/owner compensation over $100,000 

What are allowable uses of loan proceeds? 

• Payroll costs (as noted above) 

• Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums 

• Employee salaries, commissions, or similar compensations (see exclusions above) 

• Payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation) 

• Rent (including rent under a lease agreement) 

• Utilities 

• Interest on any other debt obligations that were incurred before the covered period 

What are allowable uses of loan proceeds? 

• Payroll costs (as noted above) 

• Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums 

• Employee salaries, commissions, or similar compensations (see exclusions above) 

• Payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation) 

• Rent (including rent under a lease agreement) 

• Utilities 

• Interest on any other debt obligations that were incurred before the covered period 

What are the loan term, interest rate, and fees?  The maximum term is 10 years, the maximum interest rate is 4 percent, zero loan fees, zero prepayment fee (SBA will establish application fees caps for lenders that charge). 

How is the forgiveness amount calculated?  Forgiveness on a covered loan is equal to the sum of the following payroll costs incurred during the covered 8-week period compared to the previous year or time period, proportionate to maintaining employees and wages (excluding compensation over $100,000): 

• Payroll costs plus any payment of interest on any covered mortgage obligation (not including any prepayment or payment of principal on a covered mortgage obligation) plus any payment on any covered rent obligation plus and any covered utility payment. 

How do I get forgiveness on my PPP loan?  You must apply through your lender for forgiveness on your loan. In this application, you must include: 

• Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance filings 

• Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities. 

• Certification from a representative of your business or organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with the program’s guidelines for use. 

What happens after the forgiveness period?  Any loan amounts not forgiven at the end of one year is carried forward as an ongoing loan with max terms of 10 years, at 4% max interest. Principal and interest will continue to be deferred, for a total of 6 months to a year after disbursement of the loan. The clock does not start again. 

This resource article is courtesy of the Mason Contractors Association of America. For more information visit the COVID-19 Resource Hub at coronavirus.masoncontractors.org.

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