PAYCHECK PROTECTION PROGRAM

Please find this memo to be a summary of information that covers the new Paycheck Protection Program (PPP) that is part of the CARES ACT. This memo is by no means a complete analysis of the program, and should not be taken as direct legal advice. Please contact Lusk Law, LLC for any specific legal questions questions regarding Paycheck Protection Program.

This program provides a unique opportunity for self-employed individuals, sole proprietorships, and independent contractors who may not receive a paycheck, as the program permits you to include net earnings from self-employment as calculation towards payroll. This program will offer self-employed individuals protection during these challenging times.

WHO MAY BORROW:

Small businesses with 500 or fewer employees (including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors) are eligible.

Businesses with more than 500 employees are eligible in certain industries. If you are unsure of your business size please refer to the SBA webpage

SBA’s affiliation standards are waived for certain small businesses. Please refer to the following link(s) to confirm if you meet these requirements

https://www.census.gov/eos/www/naics/ or https://www.sba.gov/sba-franchise-directory

WHAT DO I NEED:

Paycheck Protection Program Loan application and required documentation, can be found HERE including:

  • payroll documentation (for independent contractor or sole proprietor payroll costs include wages, commissions, income, or net earnings from self-employment);
  • verification of number of full-time equivalent employees and pay rates;
  • payments on eligible mortgage;
  • payments on lease; and
  • payments on utility obligations.

The application is attached HERE.

WHERE DO YOU GO:

All federally insured depository institutions, federally insured credit unions, and Farm Credit System institutions are eligible to participate in this program.

Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. (find a list of the approved lenders at www.sba.gov)

WHEN:

April 3, 2020   – Small Businesses and Sole Proprietorships can apply

April 10, 2020 – Independent contractors and Self-Employed individuals can apply

June 30, 2020 –   Loan program ends

Loan payments are deferred for 6 months with interest accruing over this period.

2 years: Loan will become due. Loan will be forgiven under certain circumstances, including maintaining employees and using proceeds for specified expenses of payroll, rent/mortgage, and utilities (see details below).

HOW DOES IT WORK:

One time loan with a fixed interest rate of .50% in which the Loan proceeds are used over the next 8 weeks to cover:

– Payroll costs

* Salary, wages, commission, or tips ($100,000- ann. cap);

* Employee benefits (See Borrow Fact Sheet);

* State and local taxes assessed on compensation;   and

* For a sole proprietor or independent contractor; wages, commissions, income, or net earnings from self-employment ($100,000- ann. cap)

– Most mortgage interests, Utility costs, and Rent with leases in force before 2/15/2020

Employee and compensation levels are maintained.

You will only be required to repay the loan if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan, or if you do not maintain your staff and payroll.

Your loan forgiveness will be reduced if:

  • Reduce or decrease your full-time employees
  • Decrease salaries and wages by more than 25% for any employee that made less than $100,000 Annualized in 2019.

You have until June 30, 2020 to restore your full- time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

The Paycheck Protection Program (PPP) Information sheet and PPP Borrow Information sheet can be found at the Treasury webpage:

WARNING: THERE IS A FUNDING CAP, SO PLEASE APPLY QUICKLY. AND IF THE PROCEEDS ARE USED FOR FRAUDULENT PURPOSES, THE U.S. GOVERNMENT WILL PURSUE CRIMINAL CHARGES AGAINST YOU

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