Written on: April 1, 2020 by ICM
A note from the Fuel Merchants Association of New Jersey
March 31, 2020
Last Thursday 26, 2020 President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law. One of the provisions in the CARES Act is the Paycheck Protection Program (PPP).
The PPP makes eligible for Small Business Administration loans employers with 500 or fewer employees. The PPP loan is for certain expenses incurred between Feb. 15, 2020—Jun. 30, 2020.
The amount of the loan an employer is eligible for is the lesser of two and a half times the average monthly payroll costs for the prior year or $10 million dollars. Independent contractors and sole proprietors are eligible for the PPP.
The loans are available to pay for payroll costs. Payroll costs are defined as: employee salary, wages, commissions, vacation, parental leave, family leave, medical leave, sick leave, group health benefits, including insurance premiums, retirement benefits, state or local taxes assessed on employee compensation.
(Note: The medical and sick leave costs are not for the leave allowed under the Family First Coronavirus Response Act. Those expenses will be reimbursed to employers through retaining the withholding on employee federal income tax and the employer and employee portions of Social Security and Medicare).
In addition to paying for payroll costs, the loans are available to pay for rent, mortgage interest, and utilities.
Provided the loan is used for payroll costs, rent, mortgage interest, and utilities, and is for the period of Feb. 15, 2020 —Jun. 30, 2020, the loan will be forgiven.
Annual salaries of $100,000 or more are not eligible for loan forgiveness. However, for individuals earning over $100,000, the portion of their salary up to $100,000 may be forgivable and any amount of their salary over $100,000 may be eligible for a loan over a 10-year period at the SBA rate that is not to exceed 4%.
The Congressional intent in allowing the loan to be forgiven is that employers will not layoff employees in the period between Feb. 15, 2020—Jun. 30, 2020.
The maximum amount of the loan to be forgiven will be reduced in proportion to the number of employees reduced between Feb. 15, 2020—Jun. 30, 2020 when compared to the prior calendar year. If an employer laid off employees between Feb. 15, 2020—April 25, 2020 and rehires them prior to June 30, 2020 it will not be counted against them for purposes of loan forgiveness.
Unlike other SBA loans the loan applicant will not need to prove inability to receive a loan elsewhere and neither a personal guarantee nor collateral is required. There are no application fees.
These loans will be distributed by commercial banks. Please check with your bank to see if they are a participating lender under the Small Business Administration’s Paycheck Protection Program (PPP).
Earlier today the Small Business Administration updated this site with additional information on the PPP. Click here for more from the SBA and a program overview from the US Treasury Department is here. A sample application form for the PPP is here if you are interested in getting a head start on the process.
Included in the SBA’s updated information is the following statement, “The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll).”
Lenders may begin processing applications as soon as Friday April 3, 2020 for employers and Friday April 10, 2020 for independent contractors and sole proprietors.