Paycheck Protection Program. Here's What You Need To Know

Please note: Guidefitter has aggregated all information from external sources. This should not be taken as legal advice. A huge thank you to state outfitter & guide associations, industry associations, and others who are taking the time to communicate with their community. Together we will get through this. Resources are linked throughout the post & at the bottom of this page.

"Paycheck Protection Program (PPP): This is a loan intended to help businesses keep their workforce employed during the Coronavirus crisis."

Quick Facts:

• Eligible businesses can apply for loans up to $10 million which may be forgiven if the funds are used for approved expenses.
• PPP loans are administered by the Small Business Administration (SBA). This means the SBA will insure the loan, but the loan itself is distributed by a local or national bank. Your PPP loan application must be submitted to that local or national bank.
• Some smaller, local lenders have started accepting loan applications from small business owners and sole proprietorships (as of Friday, April 3), while other larger financial institutions are waiting for further guidance before accepting applications.
• Independent contractors and self employed persons will be able to start applying for PPP loans starting Friday, April 10.
• PPP loans will be available through June 30, 2020.
• Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines or if salaries and wages decrease.
• Find more information from the SBA here.
• Find more information from the US Treasury here.

Q&A

Where can I apply?
You can apply through any existing SBA 7(a) lender or any other participating banking institutions. It is advised that you reach out to your existing lender first - an institution you already have a relationship with. Many SBA-approved banks are limiting applications to existing customers only. Otherwise, you may need to open an account with another bank or find a lender who is willing to process your PPP loan application even though your business is not currently a customer.

Find a list of participating SBA-approved financial institution here.

When can I apply?
PPP loans are available on a first-come, first-served basis. All PPP loans must be made on or before June 30, 2020.

• Starting April 3, 2020, small businesses and sole proprietorships can apply
• Starting April 10, 2020, independent contractors and self-employed individuals can apply

Who can apply?
All small businesses – including nonprofits, veterans organizations, sole proprietorships, self-employed individuals, and independent contractors

Am I eligible?
If you answer yes to the following items:

• Your business has less than 500 employees whose primary residence is within the US (you can be a sole proprietorship, independent contractor, or self-employed person) *Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries
• Your business was in operation on February 15, 2020 and had employees for whom you paid salaries and payroll taxes
• You intend to maintain or rehire employees and maintain your salary level with the funds provided by the loan
• You have a great understanding & record of your payroll expenses. You are able to prove how much money you need to borrow in order to maintain your payroll.
• You are prepared to keep a rigorous record of where each dollar of this loan is spent.

How much can I borrow?
Up to $10 million or 2.5 times your average monthly payroll costs from the last 12 months (determine your average with the formula).

Forbes: How To Calculate Payroll Costs

Entrepreneur: How To Submit Your Application & Calculate Loan Amount

Interest rate?
1%

Maturity date?
2 years from the disbursement date

Is collateral needed?
No

Personal guarantee?
No

What fees will I pay?
None

Are my loans on deferment?
Yes. You will not have to make payments on your loan for six months following the date of disbursement of the loan, however interest will accrue during that time.

How can PPP loan proceeds be used?
The loan can be used for

• payroll costs (including benefits)
• interest on mortgage obligations, incurred before February 15, 2020 (but not mortgage prepayments or principal payments)
• rent, under lease agreements in force before February 15, 2020
• utilities, for which service began before February 15, 2020
• interest payment on any other debt obligations that were incurred before February 15, 2020
• refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020 (*See section on guidance for refinancing an EIDL loan)

*At least 75% of the PPP loan proceeds must be used for payroll costs.

What counts as “payroll costs”?
Payroll consists of compensation to employees (whose principal place of residence is in the US) in the form of:

Employee compensation, capped at $100,000 annualized for each employee, in the form of:

• Salaries, wages, commissions, or similar compensation
• Cash tips or the equivalent (based on employer record of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips)

Employee benefits, including:

• Payment for vacation, parental, family, medical, or sick leave
• Allowance for separation or dismissal
• Payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement
• Payment of state and local taxes assessed on compensation of employees

For independent contractor or sole proprietorship applicants:

• Wages, commissions, income
• Net earnings from self-employment or similar compensation

What is excluded from “payroll costs”?

• Any compensation of an employee whose principal place of residence is outside of the US
• The compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessary
• Federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020, including the employee’s and employer’s share of FICA and Railroad Retirement Act taxes, and income taxes required to be withheld from employees
• Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act

Do independent contractors count as employees?
No, independent contractors can apply for a PPP loan on their own

Can my loan be forgiven?
Yes, the loan can be forgiven up to the full principal amount and any accrued interest if the borrower:

• Maintains employee count
• Maintains compensation levels
• Doesn’t use more than 25% of the loan for non-payroll costs

*The SBA is due to issue additional guidance on loan forgiveness.

How do I request loan forgiveness?
You must submit a request to the lender that is servicing the loan. You will submit information on eligible uses of loan proceeds spent over the eight-week period following the date of the loan, number of full-time equivalent employees, and employee compensation.

Can I apply for more than one PPP loan?
No

Can I refinance an EIDL loan?
If you received an EIDL loan from 1/31/20 to 4/3/20, you can apply for a PPP loan. If your EIDL loan was not used for payroll costs, it does not affect your eligibility for a PPP loan. If your EIDL loan was used for payroll costs, your PPP loan must be used to refinance your EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan.

Am I ineligible?
You are ineligible for a PPP loan if:

• You engage in any activity that is illegal under federal, state, or local law;
• You are a household employer (Ex - household who employs a nanny);
• An owner of 20% or more of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last 5 years;
• You, or any business controlled by you or any of your owners, has ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted within the last 7 years and caused a loss to the government.

What is the recourse for unauthorized use of PPP loan proceeds?
If PPP funds are used 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 the unauthorized use.

Specialty provisions for hospitality & dining businesses
The SBA’s affiliation standards are waived for small businesses:

• In the hotel or food services industries (NAICS code beginning in “72”); Or
• Are franchises in the SBA’s Franchise Directory (click here to check); Or
• Receive financial assistance from small business investment companies licensed by the SBA.

What information do I need to apply?
Completed Paycheck Protection Program Application (SBA Form 2483)

Documentation as necessary to establish eligibility such as:

• Evidence of business start date (Tax ID issuance or formation docs)
• 2019 Payroll costs, or most current rolling 12 months of payroll info:
• Payroll processor records (employee count and payroll detail)
• Payroll tax filings (Form 941s, W3)
• Form 1099-MISC, for independent contractor applicants
• Income & expense detail, for sole proprietorship applicants
• 2019, or most current rolling 12 months information of eligible employee benefit cost information, including health insurance premiums & retirement plan funding.

*For borrowers that do not have such documentation, borrower can provide other supporting documentation, such as bank records sufficient to demonstrate qualifying payroll amount.

How do I apply?
Complete the PPP borrower application form:
Borrower Application Form

Submit your application through any existing SBA 7(a) lender or any other participating banking institutions. It is advised that you reach out to your existing lender first - an institution you already have a relationship with. Next, consult with your local lender as to whether it is participating in the program

Find a local lender here: Small Business Administration - Find Eligible Lenders

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Additional Resources:

American Outdoors Association - COVID-19 Guidance
American Outdoors Association - Webinar Recording (March 27)
Idaho Outfitters & Guides Association
IRS Tax Relief
Johns Hopkins University
Outdoor Industry Association - Webinar Recording (April 2)
Outdoor Industry Association - The Power of the Outdoors
Paycheck Protection Program: Here’s What You Need To Know (April 3)
Small Business Administration - Disaster Loan Assistance
Small Business Administration - PPP Loan
Small Business Development Center (SBDC) Network