Before the Feds unveiled the Paycheck Protection Program (PPP), many employers laid off employees not knowing what else to do, or thinking it was in the best interest of employees to collect unemployment.
Now with the PPP program, employers are seeing that they need to retain 50% of their workforce but are unclear if that means they need to re-hire them immediately during this crisis to be eligible for the loan. There are also several nuisances that may not have been accounted for in the legislation around businesses that CANNOT operate right now and are worried they have to hire back their employees even when there is no job to be done while non-essential businesses are shut down.
Below are a list of commonly asked questions about PPP:
1. How will SBA’s PPP loans impact businesses that laid people off prior to the Executive Order issued by Gov. Pritzker?
It would impact the amount of the loan and whether it is forgiven. The maximum loan amount is the lesser of: (1) (a) the average total monthly payments by the applicant for payroll costs incurred during the one-year period before the date the loan is made, multiplied by (b) 2.5; and (2) $10 million. Loan forgiveness is eligible for those employers that retain or rehire laid off employees between February 15 – June 30, 2020. Loan forgiveness amount is reduced if employee’s wages are reduced or number of employees reduced. The loan is forgiven at the end of the 8-week period after you take out the loan. Borrowers will work with lenders to verify covered expense and the proper amount of forgiveness. Borrowers can choose which 8 weeks they want to count towards the covered period, which is between February 15 – June 30, 2020.
2. Does the SBA PPP requirement to retain 50% of staff mean that they have to be retained NOW, or when the business reopens? How will this be enforced?
It’s not a requirement to receive loan funds, it a requirement to have the loan forgiven. Borrowers will work with lenders to verify covered expense and the proper amount of forgiveness. The spirit of the loan is to keep people employed and pay payroll.
3. If a business is required to keep 50% of their staff NOW, are they ineligible for a PPP loan if they CANNOT safely operate (e.g. a hairdresser)?
No. You can apply for the PPP loan and receive funds to pay payroll and not be operating.
4. If they are required to retain staff NOW, is there any flexibility in the requirement to retain 50% of the staff? What about a restaurant that is open and capturing some revenue, but barely enough to stay afloat. For some, retaining 50% of their staff is unnecessary under the current operating conditions. For others, there is no work to be done (e.g. a hair salon) and it’s counterproductive to bring back staff now and pay them when the business cannot generate revenue.
It would impact the amount of the loan and whether it is forgiven. The maximum loan amount is the lesser of: (1) (a) the average total monthly payments by the applicant for payroll costs incurred during the one-year period before the date the loan is made, multiplied by (b) 2.5; and (2) $10 million. Loan forgiveness is eligible for those employers that retain or rehire laid off employees between February 15 – June 30, 2020. Loan forgiveness amount is reduced if employee’s wages are reduced or number of employees reduced. Note: There is also the Emergency Injury Disaster Loan that does not have a retain or rehire employment requirement which I would encourage you to have your constituency look into. That loan is administered directly through the SBA.
We are also finding constituents are worried that applying for one loan may exclude them from another, or that they’ll be offered one loan but it will be of lesser value than another one they may be eligible for and automatically exclude them from other loan options.
5. Can individuals apply for and be offered more than one loan but only legally accept one loan?
No. A business can apply for both the Emergency Injury Disaster Loan and the Paycheck Protection Program loan and receive both. However, loan funds have to be used for different purposes (i.e. you cannot use both EIDL funds and PPP funds for payroll). Since Senator Feigenholtz’s district is in Chicago, businesses in her community do not qualify for the Illinois Emergency Loan Fund.
6. Does applying for one loan (federal, state, city, etc) automatically disqualify someone from another loan?
No. However, loans are need based and could factor into receiving a secondary loan.
Many 501(c)3s are unclear if the same requirements for businesses apply to them when soliciting SBA/PPP loans.
7. Are the rules for 501(c)3s applying for PPP exactly the same as small businesses?
8. What are the limits to 501(c)3s accessing 7(a)/PPP loans? Do they already need to be receiving federal grant dollars (e.g. NEA, NEH, etc)?
9. If a 501(c)3 employs over 500 employees across the state, but no more than 500 employees per location, are they eligible for PPP?
Many businesses in our community were just getting ready to open or opened days before the “Shelter in Place” order took effect. However, we heard that businesses eligible for PPP must have been in operation on or before 2/15/2020.
10. How is “in operation on 2/15” defined? Does that mean they have to have captured revenue, or can they have been a business preparing to open their doors with all their paperwork, tax documents, etc. filed?
Yes, they would have been considered in operation on 2/15. For the PPP program however, they would have had to begin payroll because it the purpose of the loan and how the loan is determined.