Apr 23, 2020
Posted Under: COVID
Congress is getting ready to appropriate additional funds to the popular PPP and EIDL loan programs. If your organization has not already applied, you’ll want to be ready for the next round because funds will run out quickly. If you need help preparing – contact us.
Steps you can take now to be ready to apply for the PPP:
- Contact your lender immediately to let them know you intend to apply. If there’s a waiting list, get on it. If you can’t reach your lender or they are not offering the loans, try a different lender or one of the online lenders (see list below). This can be a frustrating step. Don’t give up!
- Ask for approval from your board to accept the loan(s). Let the board work on this while you work on the application so you’re ready to accept the loan when it comes.
- Preview the loan applications.
- Ready your documentation. Your lender will ask you for documentation. Some lenders may ask for different documentation than others. Try to be ready with everything so the application process can proceed as quickly as possible. You may need:
- EIN, articles of incorporation, bylaws
- Balance sheet/profit and loss sheet
- Quarterly reports
- Items to document payroll costs. Many lenders prefer using your payroll costs from 2019 as shown on IRS forms 941, 940 and W3. Be sure to include all allowable payroll costs:
- Compensation (salary, wage, commission, or similar compensation, payment of cash tips)
- Payment for vacation, parental, family, medical or sick leave
- Allowance for dismissal or separation
- Payment for group healthcare benefits including insurance premiums
- Payment of any retirement benefit
- Payment of state or local tax assessed on the compensation of employees
- Note that only payroll cost for employees based in US may be included. And only the first $100,000 of an employee’s cash compensation may be included.
Preparing for the EIDL
As soon as the application opens, you must go to the SBA website to apply (not to a lender).
You will be asked for:
- Gross revenues for the 12 month prior to the date of the disaster (January 31, 2020): This number will be on your annual income statement.
- Cost of goods sold for the 12 month prior to the date of the disaster (January 31, 2020): If applicable, this number will be on your annual income statement.
- Compensation From other sources received as a result of the disaster: list any grants received
Other Tips for Applying
- During and after the application process, keep good documentation of the process. Write down all loan numbers, names of representatives you worked/spoke with, keep all related emails, etc.
- Ask your lender what documentation they will ask for to approve loan forgiveness.
- Ask your lender when you will find out about approval and distribution of funds.
- Work with your financial team to set up clear record keeping to track receipt and use of all funds received. (You may apply for both loans. You may not use PPP and EIDL funds for the same expenses. For example: you may use both funds for payroll, but not for the same employees during the same time period. Pay Jane with PPP funds in May/June, use EIDL funds in July.)
- Don’t assume you are ineligible, apply and work with the loan officers to confirm eligibility.
- Watch out for scams related to these loans.
- Remember these are new loans, and the regulations are literally still being finalized.
- Be persistent, don’t give up!
- Be patient, this can be a frustrating process, but your mission and your organization will benefit from your effort.
Accessing the Loans
You must apply for the PPP through an approved lender, this includes:
Overview of the loans
Paycheck Protection Program Loan:
- Apply through an approved lender – see a sample application here
- Loan amount is equal to 2.5 times average monthly payroll costs.
- Loan is forgivable if at least 75% of funds are spent on payroll within 8 weeks of disbursement and employee levels are maintained at February 15, 2020 levels
- Funds may be spent on:
- Payroll expenses
- Rent or lease or payment of mortgage interest
- Utilities
- Funds not forgiven are a loan with:
-
- 1% interest rate
- 2-year maturity date
- First payment deferred 6 months
- No prepayment penalty
EIDL Loan and EIDL Advance:
Apply through the SBA website
- EIDL loan
- Up to $2,000,000
- 2.75% interest rate for nonprofits
- 30-year term
- Payments deferred for 1 year
- Apply on SBA website and wait for a SBA representative to contact you
- EIDL advance
- Must apply for EIDL and check box that you would like the advance
- Up to $10,000, $1,000 per employee
- Fully forgivable even if borrower is not ultimately approved for EIDL loan
- No notice of advance, funds will be deposited by Treasury into your account
Many lenders stopped accepting applications when the initial round of funding ran out. As soon as congress appropriates additional funding, lenders may submit new applications to the SBA.
