New Guidance and Infusion to the PPP

Paycheck Protection Program revived – with new regulations

The Paycheck Protection Program and Health Care Enhancement bill passed last week gave a $310 billion replenishment to the PPP after all funds were depleted after less than two weeks.

PPP loans are available to small businesses that were in operation on February 15, 2020 with 500 or fewer employees, including self-employed individuals, sole proprietorships, and independent contractors.

The U.S. Small Business Administration (SBA) issued another round of regulations on the program shortly before it resumed accepting applications from participating lenders on Monday.

The Treasury created a new resource to calculate loan amounts, which includes guidance directed toward:

• Self-employed individuals with no employees;
• Self-employed individuals with employees;
• Partnerships;
• S corporations and C corporations;
• LLC owners (based on filing as a sole proprietor, partnership, or corporation).

The SBA also added guidance to the PPP FAQs page. The new guidance addresses a wide range of topics.

Good Faith Certification

Borrowers must take into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. A borrower should be prepared to demonstrate to SBA the basis for its certification.

Lenders may rely on a borrower’s certification regarding the necessity of the loan request. Any borrower who applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith.

Employee Headcount

All employees (full-time, part-time, or other basis) should be used to determine eligibility under the 500-employee threshold established for the Paycheck Protection Program.

Stipends/Allowance

The cost of a housing stipend or allowance provided to an employee as part of compensation counts toward payroll costs, subject to the $100,000 annual compensation per employee limitation.

US Residence

PPP applicants and lenders may consider the principal residence rules when determining whether an individual employee’s principal place of residence is in the United States

Seasonal Employers

Upon further consideration, Treasury determined that many seasonal employers have seasons which are later in the year. These employers are now allowed to use an alternate base period, any consecutive 12-week period between May 1, 2019 and Sept. 15, 2019.

Keep detailed records

As a reminder, loan recipients should be sure to note the eight-week anniversary from receipt of a PPP loan (the “covered period”) for spending the loan proceeds and keep a detailed record of every item for which the PPP funds are used (payroll costs, covered rent obligations, covered mortgage obligations, and covered utility payments).

KRS professionals are available and happy to assist with loan and grant applications. We continue to update our Coronavirus Resources Page. Please contact us if you have any questions, concerns, or need advisement during this unprecedented time.