Paycheck Protection Program Q & A

© 2020 Donaldson Legal Counseling PLLC All Rights Reserved. Updated 4.6.2020
Updated Guidance
Q&A

www.attorneylawny.com
Your Presenter:
Tiffany A. Donaldson, Esq.
Donaldson Legal Counseling PLLC
Graduated from the University of Miami School of Law
Practiced Small Business Law for over 10 Years
Assists small business owners with:
- Loan Decisions
- Employee Leave Laws
- Formation
- Contracts
- Trademarks
- Employment Documentation and Hiring

Paycheck Protection
Program
Q&A

CARES Act
 The Coronavirus Aid, Relief, and Economic
Security (“CARES”) Act was signed into law
on March 27, 2020.

Paycheck Protection Program
What is It?

 What is It?
 Modification to the SBA 7(a) Loan under the Small
Business Act (15 U.S.C. 632).
 Allows for loosened restrictions on who can
borrow, and how much;
 Allows forgiveness for a portion of the loan

Who Is Eligible?

Who is Eligible?
 Open during the covered period: February 15,
2020 – June 30, 2020 Any business that:
 Has 500 Employees or Less
 For-Profit Business
 Non-profit
 Veterans’ organization,
 Tribal business,
 Also. . .

Who is Eligible?
 In business as of February 15, 2020
– June 30, 2020 &
 Sole Proprietor
 Independent Contractor and
 Partners of a Partnership
 LLC Owners who Work for the
Business
 S Corp Owners who get a W2 only

 No need to prove losses, just have to have been
affected generally by COVID-19 issues

WHAT ARE THE LOAN TERMS?

 WHAT ARE THE LOAN TERMS?
 2-year maturity date
 1.0 % interest rate
 6 month deferral payments
 Interest will accrue during 6 month period
 Forgiveness of up to 8 weeks of Payroll + rent +
utilities

HOW MUCH CAN I BORROW?

 HOW MUCH CAN I BORROW?
 2.5 times the average total monthly payments by
the applicant for “Payroll Costs”
 Not more than $10,000,000.00
 You Can Refinance EIDL

Payroll Costs under PPP include:
 Employee Salary, wage, commission, or similar
compensation paid ($100,000.00/person annual cap)
 Payment of cash tip or equivalent
 Payment for employee vacation, parental, family,
medical, or sick leave (Not Families First Corona Virus
Response Act Leave)
 Allowance for dismissal or separation;
 Payment required for the provisions of group health
care benefits, including insurance premiums;
 Payment of any retirement benefit; or
 Payment of State or local tax assessed on the
compensation of employees

How Does A Sole Proprietor Determine
his/her “Payroll?”

How Does a Sole Proprietor Determine
his/her Payroll?
 The sum of payments of any compensation to or income of
a sole proprietor or independent contractor that is a
wage, commission, income, net earnings from self-
employment, or similar compensation and that is in an
amount that is not more than $100,000 in 1 year, as
prorated for the covered period.

How Do You Calculate and “Average
Month” of Payroll?

Calculating “Average Month”
 The average monthly payroll costs must be determined
from the 12-month period prior to the date the loan was
made.
 But, for those not in business as of February 15, 2019,
they may use the average payroll costs from January 1,
2020 through February 29, 2020.

What Can Loan Funds Be Used On?

Uses of Loan Funds
 Expenses the business incurred from February 15, 2020
through June 30, 2020 on:
 Payroll Expenses,
 Employee salaries, commissions, or similar compensations,
 Continuation of group health care benefits during periods
of paid sick, medical, or family leave, and insurance
premiums;
 Payments of interest on any mortgage obligation;
 Rent (including rent under a lease agreement);
 Utilities;
 Interest on any other debt obligations that were incurred
before the covered period.

Forgiveness
 What Can Be “Forgiven?”

Forgiveness
 During the 8-week period following the date of the loan, money used
for the following may be forgiven, subject to the reductions:
 a. Payroll costs as defined earlier at least 75% of total forgiveness
 Up to 25% of total forgiveness:
 b. Any payment of interest on any mortgage liability by the borrower
incurred prior to February 15, 2020.
 c. Rent obligated under a leasing agreement in force before
February 15, 2020;
 d. Payment for a service for the distribution of electricity, gas,
water, transportation, telephone, or internet access for which service
began before February 15, 2020.

Reductions
Two type of reductions are explained in the CARES Act.
#1: Total Forgiveness Average number of full-time
Eligibility Amount X equiv. employees during the 8-week pd
Avg. No. full-time equivalent
employees from Jan. 1, 2020 – Feb. 29, 2020
or
Avg. No. full-time equivalent employees
from Feb. 15, 2019 – June 30, 2019).

Reductions
Two type of reductions are explained in the CARES Act.
#2: Amount of loan forgiveness be reduced by the same amount as the
total amount in reduction in total salary incurred by employees over the
8-week period after the loan date.
 only applies as to employees who were making $100,000.00 or less in
2019, and
 where such decrease is over 25% of the employee’s total annual
salary, as based on the last full-quarter before the loan date.

Rehiring
 Can I Re-Hire to Avoid Reductions?
 If you reduced number of employees or the
salaries of employees during the time period of
Feb. 15, 2020 - April 26, 2020, you shall not be
subject to the reduction provisions if the
number of employees and amount of salaries
are returned to the levels on February 15,
2020, by June 30, 2020.

Deferrals
 The CARES Act allows a six-month deferral on
portions not forgiven, before borrowers are
required to begin making payments on any
principal.

Seeking Professional Guidance?
Contact Donaldson Legal Counseling PLLC
counsel@dlcesq.com

Paycheck Protection Program Q & A

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