As of this morning (Friday, April 3, 2020) there have been updates and additions to the Paycheck Protection Program (PPP) rules. Some of the items below are directly from the new directive issued today.
Please be aware of the following when talking to your bank:
There is an updated application form. The final version of the application (CLICK HERE FOR APPLICATION) should be used in conjunction with your bank's loan process.
The definition of payroll costs has been updated. It specifically excludes any payments to independent contractors.
Do independent contractors count as employees for purposes of PPP loan
calculations? No, independent contractors have the ability to apply for a PPP loan on their own so they do not count for purposes of a borrower’s PPP loan calculation.
Also, we want to caution you about how you use the proceeds from this loan. The loan is supposed to be used for the qualified expenses ONLY. Any willing misuse of the funds could put you in legal jeopardy.
What happens if PPP loan funds are misused? If you use PPP funds for unauthorized purposes, SBA will direct you to repay those amounts. If you knowingly use the funds for unauthorized purposes, you will be subject to additional liability such as charges for fraud. If one of your shareholders, members, or partners uses PPP funds for unauthorized purposes, SBA will have recourse against the shareholder, member, or partner for any of the unauthorized use.
The intent is that the proceeds will be used at least 75% for payroll and related expenses and 25% for other qualified expenses. We strongly suggest you carefully track the use of these funds to avoid any misuse. If the funds are not used for qualified expenses or are used for unauthorized purposes, the SBA will direct you to repay those funds. Our understanding is this repayment will need to be immediate. If the funds are used for qualified purposes and you meet the qualification of maintaining the payroll, then the loan is forgiven and no repayment will be required. If the funds are used for qualified expenses, but you do not meet the payroll thresholds, then part of the loan will not be forgiven and will need to be paid back over time.
It is also important to remember that you will have only eight (8) weeks following the funding of the loan to justify the use of the funds. You need to be sure you are continuing to pay all payroll costs and other qualified expenses during this eight (8) week period. If you usually pay yourself on an annual or other periodic basis, you will need to make regular payroll during this 8 week period in order to justify the use of the proceeds. These records will be required to be submitted after the eight (8) week period in order to show how the funds were used and to determine how much of the loan will be forgiven.
While your bank is the point of contact for the loan application and process, know that our team at Janssen & Igar are here to help with any documents or information required.
We will get through this together!
Please be aware of the following when talking to your bank:
There is an updated application form. The final version of the application (CLICK HERE FOR APPLICATION) should be used in conjunction with your bank's loan process.
The definition of payroll costs has been updated. It specifically excludes any payments to independent contractors.
Do independent contractors count as employees for purposes of PPP loan
calculations? No, independent contractors have the ability to apply for a PPP loan on their own so they do not count for purposes of a borrower’s PPP loan calculation.
Also, we want to caution you about how you use the proceeds from this loan. The loan is supposed to be used for the qualified expenses ONLY. Any willing misuse of the funds could put you in legal jeopardy.
What happens if PPP loan funds are misused? If you use PPP funds for unauthorized purposes, SBA will direct you to repay those amounts. If you knowingly use the funds for unauthorized purposes, you will be subject to additional liability such as charges for fraud. If one of your shareholders, members, or partners uses PPP funds for unauthorized purposes, SBA will have recourse against the shareholder, member, or partner for any of the unauthorized use.
The intent is that the proceeds will be used at least 75% for payroll and related expenses and 25% for other qualified expenses. We strongly suggest you carefully track the use of these funds to avoid any misuse. If the funds are not used for qualified expenses or are used for unauthorized purposes, the SBA will direct you to repay those funds. Our understanding is this repayment will need to be immediate. If the funds are used for qualified purposes and you meet the qualification of maintaining the payroll, then the loan is forgiven and no repayment will be required. If the funds are used for qualified expenses, but you do not meet the payroll thresholds, then part of the loan will not be forgiven and will need to be paid back over time.
It is also important to remember that you will have only eight (8) weeks following the funding of the loan to justify the use of the funds. You need to be sure you are continuing to pay all payroll costs and other qualified expenses during this eight (8) week period. If you usually pay yourself on an annual or other periodic basis, you will need to make regular payroll during this 8 week period in order to justify the use of the proceeds. These records will be required to be submitted after the eight (8) week period in order to show how the funds were used and to determine how much of the loan will be forgiven.
While your bank is the point of contact for the loan application and process, know that our team at Janssen & Igar are here to help with any documents or information required.
We will get through this together!