PAYROLL PROTECTION PROGRAM WALK THROUGH

This page attempts to provide the details how the Payroll Protection Program works and is followed by example calculations.  It is not legal advice on how to process a PPP loan which should only be undertaken with assistance from a qualified accountant.

You are eligible if you:

• are business with less than 500 employees, or
• a sole proprietor, or
• an independent contractor, or
• a franchise owner with less than 500 employees (specific rules), or
• self-employed with less than 500 employees (specific rules), AND
• had applicable expenses as defined below

Add up the total for all applicable expenses during the time period one year prior to your loan application* including:

• All wages, salaries and commissions **
• Vacation leave, sick leave, PTO, family leave, medical leave, parental leave
• Monies spent or involved in an employee termination or dismissal
• Employer contribution to costs related to maintaining a group healthcare plan including premiums
• Employer contribution to employee retirement benefits
• Employer contribution for state or local taxes assessed on employee compensation

     * If you were not in business during the period February 15, 2019 to June 30, 2019, calculate your average 

       monthly expenses based on the time period January 1, 2020 through February 29, 2020.

     ** It is unclear if you can claim wages for any individual employee with annual compensation that exceeds        

       $100,000.  The wording in the act is very ambiguous.  Logic says you should but we cannot get any LEGAL 

       confirmation of this.  You can count income of a sole proprietor or payments to an independent contractor 

       but it is limited to $100,000 prorated for the covered period (February 15, 2020 through June 30, 2020).

Calculate the average monthly total of applicable expenses.  Your loan amount is based on how many months of expenses you want to borrow but cannot exceed 2.5 times the monthly average of applicable expenses or $10,000,000.

Some or all of the PPP loan is forgivable under the following conditions:

You used loan proceeds for the following allowable expenses:

• Payroll
• Paid time off (sick, vacation)
• Paid leave under the Families First Coronavirus Protection Act
• Paid time under extension of FMLA under the Families First Coronavirus Protection Act
• State and local taxes on employee compensation
• Health insurance premiums for a program in place prior to February 15, 2020
• Interest on mortgage obligations in force prior to February 15, 2020
• Rent on a lease secured prior to February 15, 2020
• Utilities where service initiated prior to February 15, 2020

The purpose of the PPP is to assist in keeping employees on the job.  Therefore, the amount of loan forgiveness calculated above will be reduced by the following:

• FTE Reduction: Total loan amount multiplied by one of the following (borrower’s choice):

1. Average number FTEs per month during the covered period / average number FTEs per month during February 15, 2019 thru June 30, 2019  -or-
2. Average number FTEs per month during the covered period / average number FTEs per month during January 1, 2020 thru February 29, 2020

• Salary Reduction: Loan forgiveness reduced by the total amount any and all employee’s salary was reduced by more than 25% during the most recent full quarter prior to February 15, 2020

YOU MAY BE EXEMPT FROM BOTH THESE REDUCTIONS IF BY THE END OF THE EIGHT WEEK LOAN PERIOD, THE EMPLOYER HAS ELIMINATED ANY REDUCTION IN FTEs AND WAGES THAT OCCURRED BETWEEN FEBRUARY 15, 2020 AND JUNE 30, 2020

Application made through your bank or most any lending institution.  You will need to fill out applicable forms and have appropriate documentation for all expenses claimed.