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Latest news, alerts, and events.
Last night the Small Business Administration issued an interim final rule explaining details about the Paycheck Protection Program that starts today, Friday, April 3. The regulations address timely and recurring questions, which are highlighted below.
Interest rate
Contrary to earlier announcements from SBA, the interest rate for PPP loans has now been set at 1.0 percent, up from the 0.5 percent reported earlier this week.
Application
Borrowers must complete the SBA Form 2483 (Paycheck Protection Program Application Form) and provide payroll documentation.
Alaska lenders
We recommend that you work with your preferred financial institution. Currently, not all of them are set up to provide these loans, but they are working fast to make sure they can do that soon. You’ll find a list here of Alaska lenders that was current as of April 1, 2020.
Payroll costs defined
As defined by SBA: “Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation.”
Exclusions from payroll costs include compensation for employees based outside the U.S, compensation in excess of $100,000 (prorated), federal payroll taxes, qualified paid leave under the Families First Coronavirus Response Act.
Calculating payroll costs
The rule lays out a five-step process for calculating payroll costs for purposes of PPP loans:
Lender scrutiny
The interim final rule states: “The lender does not need to conduct any verification if the borrower submits documentation supporting its request for loan forgiveness and attests that it has accurately verified the payments for eligible costs. The Administrator will hold harmless any lender that relies on such borrower documents and attestation from a borrower.”
75%-25% rule for forgiveness
SBA will limit how much of a loan can be forgiven based on how the borrower spends the money. Loan forgiveness requires at least 75 percent of the loan amount be spent on payroll and no more than 25 percent on other eligible expenses (rent/mortgage, utilities). This restriction isn’t in the statute but SBA says it is imposing the restriction to promote employment.
Additional new rules for the CARES act
On April 1st, the Labor Department and the IRS put out new guidance to clarify the paid leave mandates and refundable payroll tax credits under the Families First Coronavirus Response Act.
Labor advice on paid leave
The Labor Department’s Wage and Hour Division (WHD) posted a temporary rule, effective April 1. One important detail is that WHD announced it will treat government orders for all or most residents to shelter-in-place or stay at home as triggers for paid sick or family leave. Employees not able to work because of a government shutdown order will likely be eligible for expanded unemployment benefits.
Additionally, the temporary rules expand the definition of “son or daughter” beyond what’s written in the Act to include children age 18 and older who are unable to care for themselves due to physical or mental disability. And, for parents working at home and caring for children, clocking in and out throughout the day is now acceptable vs. working a consistent eight hours at a time. Read more.
Tax advice on refundable payroll tax credits
The IRS posted an explanation of the refundable tax credits available to small and midsize businesses that are required to provide paid leave. The explanations, arranged in a helpful Q&A format, clarify common areas of confusion. View FAQ.
CARES ACT RESOURCES
The Small Business Owner’s Guide to the CARES Act – produced by the Senate Small Business Committee Staff of Ranking Member, Ben Cardin (D-MD)
Paycheck Protection FAQ’s for Small Businesses – produced but the Senate Committee on Small Business
CARES Act Loan Chart – produced by the National Council of Nonprofits eligible nonprofits choices for securing cash needed to maintain staff and operations.