The Bottom Line
The Bottom Line is where Klatzkin’s advisors provide analysis and insight into key developments in taxation, accounting, and other issues and how they affect businesses and individual taxpayers.

Additional Funding for the Paycheck Protection Program Approved

By JOHN BLAKE, CPA

April 24, 2020

** Update – April 25, 2020: The SBA will being accepting PPP applications again on Monday, April 27th, at 10:30 a.m. EST. We encourage businesses and organizations to act quickly, as the first round of funding was exhausted after just 13 days. **

On April 16, 2020, it was announced in just over two weeks the $349B in funding for the Paycheck Protection Program (PPP) was exhausted. Combined with the news, the Economic Injury Disaster Loan program (EIDL) had also lapsed funding, and it was a frustrating day for many. Anxiety and stress mounted as news that other emergency loan programs, including the New Jersey Small Business Emergency Assistance Loan Program, were also out of money. All of this against the backdrop of an extended stay at home orders and forced business closures mean many will continue to face challenging circumstances. The good news is that today, April 24, 2020, President Trump signed legislation that provides a combined $370B in additional funds for both the PPP and EIDL. This means businesses not previously able to receive a loan now have another opportunity. To help clients, prospects, and others, Klatzkin has provided a summary of the legislation below.

New COVID-19 Relief Package

Formally known as the Paycheck Protection Program and Health Care Enhancement Act (the ACT) provides additional rules and funding for loan programs and COVID-19 testing, research, and response funding. The Act provides an additional $310B in funding for the PPP loan program and increases funding for EIDL grants from $10B to $20B. To address concerns about access, the Act also requires that $30B for loans made by financial institutions and credit unions, which have assets between $10B and $50B, and another $30B for loans made by community financial institutions with assets of less than $10B. Finally, the definition of eligible entities for EIDL grants was changed to include agricultural enterprises with less than 500 employees.

Preparing for the Application Process

While it’s not yet known when the SBA will open the application process for new loan applications, it’s important to start preparing now to ensure applications can be submitted immediately. Given the first round of funding was exhausted in just two weeks, it’s expected the same may happen again. In other words, timing is everything.  Business owners should apply as soon as possible.  Until more information is available, it’s important to review lessons learned from the first application period.

  • Prepare Now– Review the current loan application information and documentation requirements to ensure all information will be ready to submit.
  • Larger Financial Institution Concerns–Some larger institutions did not adapt fast enough to handle the initial PPP loans.  However, now that time has passed, they are ready to process loan applications.  Being that $60B of the funds are being allocated to smaller institutions, it may make sense to work with a community bank or credit union to increase the approval chances.
  • Business Banker – It’s imperative to work with a business banker throughout the application process. Although submissions can be completed online, having a single point of contact will help to ensure proper documentation is submitted and for loan status updates.

Loan Application Documentation

While the SBA has provided a copy of the PPP loan application on their website, they have also allowed financial institutions to use their own form, assuming it collects the same information. However, the SBA version can serve as a useful guide. Based on our experience, the following information is typically required:

  • Basic information about the business and contact information.
  • Average monthly payroll costs, including employee salaries, wages, commissions, and tips. Don’t forget to include vacation benefits, sick days, family leave, severance payments, health insurance costs, and payment of state and local taxes on employee compensation.
  • Information on full-time employees and related payroll costs. This should include names and monthly eligible compensation, salaries pro-rated per month, and where compensation exceeds $100,000 be sure to make the proration based on $100,000.
  • Payroll related tax forms for 2019 and Q1 2020 if available. Specifically, this should include IRS Form 941, Form 944, Form 1099, and any payroll process records.
  • Articles of Incorporation reflecting when the business was started. This is needed to demonstrate the operating period of the company meets the established criteria.
  • Proof of current or good standing of the business. This can be as simple as a screenshot from the Secretary of State’s website showing company status.
  • If you are self-employed, you will need to furnish a 2019 Schedule C with your application.

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These additional business funding opportunities may provide cash flow that many New Jersey and Pennsylvania businesses cannot afford to miss. Once the SBA opens the application process, it’s imperative to act quickly to receive a loan. If you haven’t applied already, you should do so now. If you have questions about the information outlined above, need assistance with the application process, or if you require assistance with another COVID-19 business issue, Klatzkin can help. For additional information, click here to contact us. We look forward to assisting you soon.

The above represents our best understanding and interpretation of the material covered as of the date of this post. Things are moving at a rapid pace, and as such, information is subject to change.  This information is provided for informational purposes only and is not intended to be a substitute for obtaining accounting, tax, or financial advice from an accountant.

 

About the Author

John focuses on helping with the tax needs of real estate, technology and manufacturing, distribution, and wholesale companies. He works with management and business owners to review their business plan, tax planning process, identify additional saving opportunities, and ensure compliance and reporting deadlines are met. Also, John helps educate clients about the new opportunities available...

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