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April, 2020

What You Should Know About Additional PPP Funding

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Is the Paycheck Protection Program Still Available?

Yes, the Paycheck Protection Program is still available. On April 27, the SBA started accepting loan applications for the PPP program again. This came after the Senate approved the Paycheck Protection Program and Healthcare Enhancement Act on April 21. This bill increased PPP funding for small businesses needing cash flow assistance through coronavirus economic uncertainty.

What Funding is Provided By The New PPP Bill?

The Paycheck Protection Program and Healthcare Enhancement Act increased funding for the Paycheck Protection Program, the Small Business Act, Economic Injury Disaster Loans (EIDLs), institutions dispersing loans, and emergency grants. The following loan programs increased funds available that businesses can apply for:

Paycheck Protection Program

  • An additional 310 billion is now available in PPP loans for businesses.
  • The loan amount is up to 10 million per business.
  • To apply for a PPP loan, you must use an SBA approved lender.

Emergency Injury Disaster Loans

  • An additional $10 billion is available in emergency EIDL loans.
  • The loan size is up to $2 million per business.
  • There is also an additional $50 billion available for the SBA Disaster Loan account to help offset other COVID 19 requirements.

Approved SBA Lenders

  • $30 billion has been set aside for loans given by Insured Financial Institutions and Credit Unions that have assets between $10 billion and $50 billion (Senate Approves).
  • $30 billion has also been set aside for loans disbursed by Community Financial Institutions, Small Insured Depository Institutions, and Credit Unions with assets less than $10 billion

How Does the PPP Loan Work?

The Paycheck Protection Program provides loans to organizations with fewer than 500 employees per location. These loans are federally guaranteed and meant to assist employers who are keeping staff on their payroll during COVID-19.

For further explanation on types of employers that are eligible for a PPP loan and what expenses the PPP loan will cover, you can check out our article about Understanding the CARES Act Paycheck Protection Program.

Are Paycheck Protection Loans Forgivable?

Yes, PPP loans are forgivable; however, loan forgiveness is tied to an eight-week time-period that starts when the loan is initially dispersed. The following loan costs are eligible for forgiveness:

  • Payroll costs (75% of your forgiveness amount must relate to payroll)
  • Health insurance for paid sick, medical, or family leave
  • Mortgage interest payments
  • Rent; and utility payments

To calculate your loan forgiveness, click here.

Are Paycheck Protection Loans Taxable?

No, PPP loans are not taxable. Thanks to the CARES Act, PPP loan debt is excluded from a business’s gross income on federal income taxes; however, questions around state tax forgiveness still remain. Businesses won’t owe on state taxes if their states conform to tax codes before 2020 tax returns are due next year. If states fail to conform, businesses could be left with a tax burden. Stay up-to-date on your state’s tax conformity here.

In addition to federal tax forgiveness, there are still questions around tax expense deductibles. Congress intended the PPP to be non-taxable, without affecting deductibles paid on expenses during the 8-week payroll period. Deductibility guidance is still needed from the IRS and the Department of the Treasury. The American Institute of CPAs (AICPA) has already requested further guidance from the IRS regarding tax expense deductibility.

How Many PPP Loans Have Been Approved?

So far, the Small Business Administration has approved 1.6 million PPP loans. The first $349 billion in funds ran out two weeks after the CARES Act was finalized. Banks and lenders have been working around the clock to get dollars to businesses both quickly and efficiently.

Next Steps

 

1. Apply Now

With businesses exhausting the PPP loan fund so quickly after the initial CARES Act was passed, we suggest applying for a PPP loan sooner than later.

2. Rehire Laid-Off Workers

Since loan forgiveness directly correlates to maintaining payroll over an 8-week period, restaurants, hotels, and other businesses that need forgivable financing, and have limited customers, should consider rehiring their laid-off workers.

3. Look Into Alternative Business Loan Financing Options

Since so many businesses are focused on the Paycheck Protection Program and other federal government loans, other financing options have taken a back seat. The great news is if you are unable to acquire PPP financing, certain state governments have created coronavirus relief programs specifically for businesses. You can view a list of states with relief loans here.

How APS is Helping Businesses

We are keeping a close eye on the ever-changing landscape of PPP loans and the CARES Act. Here’s how APS has responded so far and how we’re helping businesses during this challenging time:

  • We have created a PPP export that makes it easy for businesses to calculate their qualified PPP loan amount.
  • We have developed and released CARES Act tracking and management offerings that eliminate the need for employers to manually track Social Security payment deferrals.
  • We have created a COVID-19 Response Team to assist in processing payroll, as well as making it easier for our clients to utilize the credits and deferrals the IRS has created.
  • We are currently developing additional system functionality to make it easier for employers to manage all the requirements under the CARES Act.

If you are considering loan options, you can visit the Small Business Administration’s website, or consult with your business advisor or attorney. As we become aware of new policies and procedures, we are frequently updating our Help Center and COVID-19 Resources Hub.

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