Payroll Protection Plan (PPP)

May 19: PPP Forgiveness Application released. The form and instructions for borrowers on how to apply for forgiveness of their PPP loans and can be viewed and downloaded here.

The SBA will resume accepting Paycheck Protection Program (PPP) applications from participating lenders on Monday, April 27, 2020 at 8:30am MDT.

Friday, April 24 update: Congress appropriated more funds for the Paycheck Protection Program. The additional $310B appropriation for PPP includes specific allocations for small financial institutions and community credit unions while also providing funds for minority-owned businesses. These forgivable loans will be awarded on a first-come, first-served basis and Colorado businesses are encouraged to apply promptly. More Information Here

The CARES Act allocated $670 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program (PPP), the initiative provides 100% federally guaranteed loans to small businesses that maintain their payroll during this emergency. Importantly, these loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward.

Businesses can do the following to prepare:

  • If your PPP loan was already in the queue at a bank, check in with your lender to ensure all paperwork is correct and in place.
  • If your EIDL application was already submitted, check the status of your application by contacting SBA at 1-800-659-2955 or disastercustomerservice@sba.gov.
  • If you have not started working with a bank yet, research available local lenders with your Chamber of Commerce (Fort Collins, Loveland, Greeley) to identify your potential provider. SBA: Find an eligible lender.
  • Self-employed, sole proprietors, independent contractors should confirm that their bank is working with their business structure.
  • Set up a bank account if you do not have one. This will be necessary to receive relief funds.
  • Prepare your paperwork, including average monthly payroll calculation (inclusive of eligible health care and retirement contributions).
  • Create a plan for the use of funds over the 8-week period.
  • Ensure that the 8-week disbursement plan complies with approved program expenditures to maximize your loan forgiveness.
  • Reach out to your accountant for guidance and support

Program Details

 Who is Eligible:

All small businesses, non-profits, veterans organizations, tribal businesses, ESOPs and cooperatives with less than 500 employees, sole proprietorships, self-employed individuals, and independent contractors

Loan Details:

  • Maximum Amount: Up to $10 million or 2.5x average payroll cost, whichever is less.
  • Interest rate of 1%
  • Maturity of 5 years
  • Deferral period after forgiveness has been remitted to the lender from the SBA (rather than ending 6 months after you received the funds)
  • If the borrower fails to apply for forgiveness, the deferral period ends 10 months after the end of the covered period
  • 100% guarantee by SBA
  • No collateral
  • No personal guarantees
  • No borrower or lender fees payable to SBA

Loan Forgiveness:

Please consider and plan for the following before spending your PPP money: contact your CPA or business advisor to prepare a cash flow projection along with an analysis on what part if any of the proceeds will be forgivable. It is highly probable that a portion of the PPP loan will not be forgivable, and this money will be acting as a low-interest loan. Spend only what you need to spend, and if you end up with unspent PPP money you have can either 1) give the remaining amount back or 2) turn it into a low-interest loan that you might need later. Here are checklists to guide you to PPP loan forgiveness:

Congress extends loan terms and reduces payroll requirements for loan forgiveness. As of 6/5/20, H.R.7010 still needs to be signed by the President, and there should be updates to the official SBA guidance soon after.

Day 1 Checklist:

  • Set up separate accounts and/or spreadsheets to track loan proceeds and eligible expenses.
  • Estimate eligible expenses that will be incurred and paid within 24 weeks from loan disbursement, ensure at least 60% of such expenses are payroll costs. Borrowers with outstanding loans as of the date of the enactment of H.R.7010 to make an election to have the original 8-week period apply in lieu of the 24-week period. can now extend the 8 week period to 24 weeks – which could be better for borrowers that have already spent the funds on sufficient expenses that provide for full forgiveness. Payroll costs include cash compensation (up to pro-rata equivalent of $100k annually per employee), health/dental/vision insurance, HAS contributions, retirement plan contributions, State Unemployment-SUTA.
  • Estimate eligible expenses for rent only-no CAM, leases, utilities-gas, water, electric, telephone landline, and Internet and interest that will be paid and incurred within 24 weeks of the loan disbursement. Please note that non-payroll costs may make up to 40% of total loan forgiveness – could be used for rent, utilities, and interest on secured debt, as defined in the law.
  • Separately determine average Full Time Equivalent (FTE) employees for the periods of 2/15/19-6/30/19 and 1/1/20-2/29/20. Forgiveness decreases when employee count is reduced from one of the comparable periods, with rehiring available through 12/31/2020 to offset the decrease.
  • Document employee pay by employee for the last full quarter before the date the loan is disbursed. Forgiveness also decreases by any reduction in pay over 25% for any employees making less than $100k annually.

Within 30 Days Checklist:

  • Check with business adviser for any updated forgiveness guidance.
  • Use the following PPP Forgiveness Estimator.
  • Track FTEs to determine if there has been a decrease from the comparable period (determined above); any decreases will need to be eliminated with rehiring available through 12/31/20.
  • Monitor employee pay to ensure no reductions in pay of more than 25%.
  • Review eligible expenses paid and incurred to date, project additional eligible expenses for remainder of 24-week period (ensure 75% of such expenses are payroll costs).
  • Gather payroll reports, invoices, receipts, canceled checks and other evidence to substantiate eligible expenses paid and incurred.

Conclusion of the 24 weeks Checklist:

  • Review final forgiveness guidance with lender and business adviser.
  • Review current FTEs against comparable period to determine if there has been a decrease; any decreases will need to be eliminated by 12/31/20.
  • Document eligible expenses paid and incurred for the 24-week period.
  • Gather payroll reports, invoices, receipts, canceled checks and other evidence to substantiate eligible expenses paid and incurred.
  • Complete application for loan forgiveness and submit to lender with supporting documentation.
  • The recalling of employees must be documented in writing (i.e. letter, email)

Please contact your CPA or business advisor to prepare a cash flow projection along with an analysis on what part if any of the proceeds will be forgivable.

 

Helpful Tools & Resources

How to Apply

Applications for small businesses and sole proprietors open April 3. Applications for independent contractors and self-employed open April 10. You will apply through your locally authorized bank and non-bank lenders. This will typically be your existing banking partner.

1

Verify your business’s eligibility

2

Review the Prepare, Apply, Comply Guide

3

Review the Application

and gather the necessary materials such as payroll tax filings, proof of lease payments, proof of mortgage payments, and proof of utility payments
4

Contact your accountant and/or bank

Get in contact with your accountant and/or bank that pays out your business’s payroll. Ask your lender if it is authorized to process your Paycheck Protection Program loan. If you are not connected to an authorized lender, find an eligible lender here