An Update On The Payroll Protection Program (PPP) BY JOEL GREENWALD, ESQ.
Q: If my business employs over 500 employees, can I qualify for a PPP loan? A: While companies with 500 or fewer employees are qualified for the PPP loans, those who have over 500 em- ployees are not automatically disqualified. Companies that fall within an employee or revenue threshold set by the SBA for their industry are also considered small business- es and qualify to apply for PPP loans. Additionally, companies that meet the SBA’s “alterna- tive size standard” based on their tangible net worth (not more than $15,000,000) and net income (not more than $5,000,000), qualify as small businesses and therefore are eligible for PPP loans. Also, the most recent guidance states that a business can be eligible, “if the business has 500 or fewer employees whose principal place of resi- dence is in the United States.” Businesses that employ more than 500 employees, therefore, should carefully ex- amine if there is another basis to qualify for the PPP loans.
NOTE The laws are changing rapidly in the current pan- demic/crisis. Therefore, the legal issues discussed here
are subject to constant change. It is best to consult with counsel con- cerning any legal advice you may need. Businesses are rushing to take advantage of the assistance provid- ed by the CARES Act. While many have already submitted applications
for PPP loans, others are wondering if they are eligible for the loan. SBA’s most recent guidance contains insight into the loan program and clarifies a few important questions. Joel Greenwald
Q: If my business qualifies for a loan, when will I receive it? A: The SBA has stated that a lender must make the first disbursement of the loan to the borrower no later than ten (10) calendar days after it approves the loan. Given the volume of the applications being received, we will need to see if lenders can comply with the SBA’s mandate. Q: What goes into payroll costs? How do I account for independent contractors? A: Payroll costs under the PPP are used both to determine the total loan amount, as well as the amount of the loan that may ultimately be forgiven. Thus, determining amounts a company spends on payroll and other covered costs are vital for PPP appli- cants. Payroll costs include the gross mon- etary compensation paid to each employee (up to a max of $100,000), plus payments made by an employer for retirement funds, health insurance premiums, as well as state and local taxes paid by the company on em- ployee compensation. Payroll costs, how- ever, do not include payments to indepen- dent contractors. Independent contractors can apply for PPP loans themselves, and a business thus cannot include payments to them in its payroll costs. Q: When does the eight-week period begin for purposes of determining the amount forgiven on my loan? A: As a reminder, the potential amount of the total loan eligible to be forgiven is equal to the amount spent on covered costs during
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April 27, 2020
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