Impact Payments Information, and SBA/PPP Loan Application and Guidelines

Recently the SBA added to its FAQ on the Paycheck Protection Program. Below is a summary of some of the more important guidance:

• In addition to the ‘number of employees’ test, you may qualify based on traditional SBA standards (such as the gross receipts test for staffing companies) or you may qualify based on the SBA’s ‘alternative size standard,’ which is a tangible net worth less than $15 million and average net income after taxes (excluded carry-over losses) for the two full fiscal years less than $5 million. Affiliate rules apply. Note that the application is not set up for either of these standards so borrowers will still need to figure that out with their lender.
• Lenders can rely on borrower’s certification as to the affiliate rules. Thus, the lender will not need to verify affiliate calculations or analysis.
• Payroll costs should use gross wages, not net wages. There was considerable confusion over this, and many lenders were applying a different standard.
• Minority shareholders with control can waive or relinquish control and no longer be deemed an affiliate.
• The $100,000 cap in “payroll costs” applies only to compensation. Benefits above the $100,000 may be counted.
• Eligible borrowers that use professional employer organization (PEO) or other payroll providers to process payroll and report payroll taxes may still report the employees towards their payroll. Any documentation provided by the payroll provider that indicates wages and payroll taxes reported to the IRS will be considered acceptable PPP loan payroll documentation. In addition, borrowers should obtain a Schedule R (Form 941) allocation schedule or other statements from payroll provider documenting the amount of wages and payroll taxes.
• Borrowers may use the previous rolling 12 months or calendar year 2019 when calculating payroll costs for the loan amount. To calculate the number of employees, borrowers may use the average number of employees per pay period over the same time periods.
• No need to refile applications based on new guidance. Borrowers may rely on laws, rules, and guidance available at the time of the relevant application. If the loan has not been processed, borrowers may revise applications based on new guidance.
• Lenders do not need to reverify Know-Your-Customer information for existing customers.