[US] COVID-19 Paycheck Protection Program (PPP)

The Paycheck Protection Program (PPP) is a loan designed to help small businesses keep their workers on payroll. The program will provide federally-guaranteed loans in amounts approximately equivalent to ten weeks of payroll costs. Loan proceeds can be used to pay for payroll, mortgages, rent, health care, utilities and other specified expenses, and are forgivable based on employment and wage levels maintained by employers. Businesses must have been in operation, with employees, on February 15, 2020.

July 4, 2020 update: The President has signed into action Bill S. 4116 extending the application deadline for the PPP to August 8, 2020 and separating the authorized limits for commitments under the PPP from other Small Business Administration loan programs.

June 5, 2020 update: The Paycheck Protection Program Flexibility Act (PPPFA) has been passed and signed. 
Check out the full list of changes: 

 

Who Can Apply

Loan Details

Employee Limits

Loan Amount Calculation

Loan Application Form

Loan Forgiveness

Where to find documentation in Wave

How to bookkeep your PPP loan

Restrictions

Additional Resources

Who Can Apply

As per SBA the following entities affected by Coronavirus (COVID-19) may be eligible:

  • Any small business concern that meets SBA’s size standards (either the industry based sized standard or the alternative size standard)
  • Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
    • 500 employees, or
    • That meets the SBA industry size standard if more than 500
  • Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
  • Sole proprietors, independent contractors, and self-employed persons

Loan Details

  • Maturity of 5 years
  • 1% interest rate
  • No collateral or personal guarantees are required
  • Neither the government nor lenders will charge small business any fees

Employee Limits

There are special rules for determining the 500 employee limit; for example, for employers in the Hospitality and Food Service industries (NAICS code 72), the 500 employee limit may be determined based on the number of employees per physical location. Certain franchises may also qualify as separate businesses.

Loan Amount Calculation

Loan amounts are determined based on 250% of average monthly payroll costs, taking into consideration average wages paid during a one-year period preceding the loan, up to a limit of $10 million. There are alternate periods for seasonal employers and those not in business in the prior year.

In addition to wages, commissions and other compensation, the calculation of payroll costs includes employer health care costs such as insurance premiums, state/local employer taxes and other specified costs. However, this calculation excludes the proportionate share of annual wages over $100,000 per employee, as well as federal employment taxes.

Loan Application Form

Click here for Borrower Application Form.

Loan Forgiveness

Click here for the latest revised Loan Forgiveness Application.

Loans are forgivable to the extent that employers maintain specified employment and wage levels (at least 60% of the forgiven amount must have been used for payroll cost). Loan amounts forgiven are excluded from taxable income for federal income tax purposes. Additionally, the loan must be used within 24 weeks upon being funded, or by December 31, 2020 - whichever comes first.

To determine the amount that will be forgiven, the average number of full-time equivalent employees per month will be compared to either the prior-year period or January through February of 2020, with a similar comparison to wage levels. Note that an alternate calculation may apply for seasonal employers.
Repayment of a proportionate part of the loan may be required if earnings of any employee is reduced by 25% or more compared to the most recent full quarter of employment before the covered period. However, this rule may not apply to employees who received, for any single pay period in 2019, annualized earnings over $100,000 (e.g., over $8,333 per month or $4,167 for a semimonthly pay period, in 2019). Special relief provisions apply for employers who rehire employees or eliminate wage reductions by December 31, 2020.
That said, the eligible forgiveness amount will not decrease if you can, in good faith, document the inability to rehire employees that were on your payroll on or before February 15, 2020, and/or the inability to hire new employees for those roles by December 31, 2020. An example of this would be a written offer to rehire workers that was declined.

Lenders will be required to obtain specified documentation to demonstrate employment and wage levels through the period.

Where to find documentation in Wave

In Wave, you can access your Payroll Wage & Tax Report by using the left-hand menu:

  1. Click Reports
  2. Click Payroll Wage & Tax Report
  3. Choose the dates for which you wish to see a report. This can be either the current quarter, previous quarter or specified dates (for example, January 1, 2020 - February 29, 2020).
  4. Click Generate Report

You will then be able to click Download PDF in the top right hand corner to download a copy of the report that outlines your Employer Summary at the top with the total amount of wage and tax liabilities, and lists individual employee wages and tax liabilities below. 

If you are using Automatic Tax Payments with Wave and are needing your Form 941 from the first quarter of 2020, you can find this by going to the Payroll tab and then into Tax Forms.

How to bookkeep your PPP loan

Wave has a detailed article outlining how to bookkeep the PPP loan, including the accruing interest, and loan forgiveness. Take a look:

Restrictions

  • Loan proceeds may not be used to pay:
    • wages exceeding $100,000 per employee (prorated for the covered period; e.g., wages over $8,333 per month for an employee);
    • Federal employment taxes
    • Employees who live outside the U.S
    • FFCRA paid sick or family leave wages for which credit is allowed
  • Once acknowledgement of loan forgiveness is received an employer is not eligible to also opt in to:
    • Take the Employee Retention Credit under Section 2301 of the CARES Act

Employers should consult with appropriate legal and tax professionals to assess which of these alternatives best meets their needs and circumstances.

Additional Resources

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