Paycheck Protection Program

Although federal PPP funds have currently been exhausted, businesses are advised to continue preparing necessary information for applications and to contact participating local lenders in the event that additional funds are allocated by Congress.

Information provided by Mark Christian, MU SBDC Director

SBA PPP resource page can be found here.

Consult your financial and legal advisers before taking advantage of any relief programs. 

Questions about PPP loan forgiveness? The SBA updated their F.A.Q. document on April 11 to reflect new questions and more detailed answers. Click below to read and download.

Paycheck Protection Program

The Paycheck Protection Program (“PPP”) authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis.

You are eligible for a PPP loan if: (i) you were in operation on February 15, 2020; (ii) you are an individual with self-employment income (such as an independent contractor or a sole proprietor); (iii) your principal place of residence is in the United States; and (iv) you filed or will file a Form 1040 Schedule C for 2019.

However, if you are a partner in a partnership, you may not submit a separate PPP loan application for yourself as a self-employed individual. Instead, the self-employment income of general active partners may be reported as a payroll cost, up to $100,000 annualized, on a PPP loan application filed by or on behalf of the partnership.

  • All loan terms will be the same for everyone
  • No eligible borrower may receive more than one PPP loan.
  • The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8-week period after the loan is made; and
  • Employee and compensation levels are maintained. 
  • Payroll costs are capped at $100,000 on an annualized basis for each employee.
  • Loan payments will be deferred for 6 months.  
  • Starting  Friday, April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders. 
  • Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders. 
  • 1% fixed rate.
  • Term is 2 years.
  • If interested in applying for a PPP loan check with your local lender. 

To find a nearby lender eligible to issue a loan under the Paycheck Protection Program please click here – https://www.sba.gov/paycheckprotection/find

Paycheck Protection Program Loan Forgiveness Application

Below information provided by Mark Christian, MU Small Business Development Center Director

The Paycheck Protection Program (PPP) Flexibility Act was signed into law on Friday, June 7.

These modifications will implement the following important changes:

  • Extend the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan forgiveness.  Borrowers who have already received PPP loans retain the option to use an eight-week covered period.
  • Lower the requirements that 75 percent of a borrower’s loan proceeds must be used for payroll costs and that 75 percent of the loan forgiveness amount must have been spent on payroll costs during the 24-week loan forgiveness covered period to 60 percent for each of these requirements. If a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.
  • Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020, due to compliance with requirements or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to worker or customer safety requirements related to COVID–19.
  • Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were employees of the borrower on February 15, 2020, and unable to hire similarly qualified employees for unfilled positions by December 31, 2020.
  • Increase to five years the maturity of PPP loans that are approved by SBA (based on the date SBA assigns a loan number) on or after June 5, 2020.
  • Extend the deferral period for borrower payments of principal, interest, and fees on PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).
  • In addition, the new rules will confirm that June 30, 2020, remains the last date on which a PPP loan application can be approved.

Need help navigating the PPP loan forgiveness process? In this video, Neil Bradley, Executive Vice President and Chief Policy Officer at the U.S. Chamber of Commerce, walks you through all the essential steps, including forgiveness calculations and repayment terms.

The below information was provided by the Small Business Administration (SBA) and the Bank of Missouri. This information is constantly changing. Be aware of updates. If you have questions please contact the SBA or your financial institutions you filed your PPP claim with. 

This application has the following components: (1) the PPP Loan Forgiveness Calculation Form; (2) PPP Schedule A; (3) the PPP Schedule A Worksheet; and (4) the (optional) PPP Borrower Demographic Information Form. All Borrowers must submit (1) and (2) to their Lender.

The form was just issued so there hasn’t been a chance yet for training or further guidance to be issued however here are some items you may want to note:

PPP loan forgiveness requires at least 75% of the potential forgiveness amount to be used for payroll costs during the Covered Period.

Nonpayroll costs eligible for forgiveness consist of:

(a) covered mortgage obligations: payments of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property incurred before February 15, 2020 (“business mortgage interest payments”);

(b) covered rent obligations: business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020 (“business rent or lease payments”); and

(c) covered utility payments: business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020 (“business utility payments”).

Covered Period: Enter the eight-week (56-day) Covered Period of your PPP loan. The first day of the Covered Period must be the same as the PPP Loan Disbursement Date. For example, if the Borrower received its PPP loan proceeds on Monday, April 20, the first day of the Covered Period is April 20 and the last day of the Covered Period is Sunday, June 14.

Alternative Payroll Covered Period: For administrative convenience, Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the eight-week (56-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date (the “Alternative Payroll Covered Period”). For example, if the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20.

Borrower’s loan forgiveness amount is subject to reduction for employees whose salary and wages were reduced by more than 25% (there is a safe harbor if the average annual salary or hourly wage is restored as of June 30, 2020).

Borrower’s loan forgiveness amount is subject to reduction to a statutory requirement concerning reductions in full-time equivalent employees (there is a safe harbor if borrower restored its FTE employee levels by not later than June 30, 2020 to its FTE employee levels in the Borrower’s pay period that included February 15, 2020).

Documents that Each Borrower Must Submit with its PPP Loan Forgiveness Application:

Payroll: Documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period or the Alternative Payroll Covered Period consisting of each of the following:

  1. Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
  2. Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:
  3. Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and
  4. State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
  5. Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the Borrower included in the forgiveness amount (PPP Schedule A, lines (6) and (7)).

FTE: Documentation showing (at the election of the Borrower):

  1. the average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019;
  2. the average number of FTE employees on payroll per month employed by the Borrower between January 1, 2020 and February 29, 2020; or
  3. in the case of a seasonal employer, the average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019; between January 1, 2020 and February 29, 2020; or any consecutive twelve-week period between May 1, 2019 and September 15, 2019.

 Documents that Each Borrower Must Maintain but is Not Required to Submit

PPP Schedule A Worksheet or its equivalent and the following:

  1. Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 1, including the “Salary/Hourly Wage Reduction” calculation, if necessary.
  2. Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 2; specifically, that each listed employee received during any single pay period in 2019 compensation at an annualized rate of more than $100,000.
  3. Documentation regarding any employee job offers and refusals, firings for cause, voluntary resignations, and written requests by any employee for reductions in work schedule.
  4. Documentation supporting the PPP Schedule A Worksheet “FTE Reduction Safe Harbor.”

All records relating to the Borrower’s PPP loan, including documentation submitted with its PPP loan application, documentation supporting the Borrower’s certifications as to the necessity of the loan request and its eligibility for a PPP loan, documentation necessary to support the Borrower’s loan forgiveness application, and documentation demonstrating the Borrower’s material compliance with PPP requirements. The Borrower must retain all such documentation in its files for six years after the date the loan is forgiven or repaid in full, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request.

April 24 updates:

Today, President Trump signed Congressional legislation authorizing an additional $310 billion for the Paycheck Protection Program (PPP). This money will be available next week to help small businesses continue to make ends meet and keep their employees on payroll during these difficult times. If you have questions about eligibility or the details of PPP continue reading down the page. The Small Business Administration will resume accepting PPP loan applications on Monday, April 27 at 10:30 AM EDT from approved lenders on behalf of any eligible borrower.

Please, keep in mind that businesses who have already submitted applications will be prioritized. If you have already submitted an application with your financial institution, contact your representative to ensure all necessary documentation is accounted for.

Like the last round of PPP funding, this additional relief is expected to move quickly. We are encouraging businesses to contact their financial advisers to be prepared if funds become available.

Unfortunately, relief programs have a high demand with a limited, set amount of funds. While we wish there would be enough for everyone in each release of funding, there is not. As new financial resources become available we will the details through our member emails, social media pages, and our website.

April 9 updates:

  • Religious organizations and farms qualify for the PPP program.
  • PPP disbursements should be made within 10 calendar days of approval.
  • The amount of forgiveness of a PPP loan depends on the borrower’s payroll costs over an eight-week period beginning on the date of the initial disbursement of the PPP loan to the borrower.

April 14, Updated information: Individuals with Self-Employment Income who File a Form 1040, Schedule C

You are eligible for a PPP loan if: (i) you were in operation on February 15, 2020; (ii) you are an individual with self-employment income (such as an independent contractor or a sole proprietor); (iii) your principal place of residence is in the United States; and (iv) you filed or will file a Form 1040 Schedule C for 2019.

However, if you are a partner in a partnership, you may not submit a separate PPP loan application for yourself as a self-employed individual. Instead, the self-employment income of general active partners may be reported as a payroll cost, up to $100,000 annualized, on a PPP loan application filed by or on behalf of the partnership.

Paycheck Protection Program FAQ

All SBA 7(a) lenders are automatically approved to make PPP loans on a delegated basis.

You will not have to make any payments for six months following the date of disbursement of the loan. However, interest will continue to accrue on PPP loans during this six-month deferment.

Yes. The amount of loan forgiveness can be up to the full principal amount of the loan and any accrued interest. That is, the borrower will not be responsible for any loan payment if the borrower uses all of the loan proceeds for forgivable purposes described in the rule and employee and compensation levels are maintained.

No, independent contractors have the ability to apply for a PPP loan on their own so they do not count for purposes of a borrower’s PPP loan calculation.

No, independent contractors have the ability to apply for a PPP loan on their own so they do not count for purposes of a borrower’s PPP loan forgiveness.

A tax-exempt nonprofit organization described in section 501(c)(3) of the Internal Revenue Code (IRC) is eligible

The following methodology, which is one of the methodologies contained in the Act, will be most useful for many applicants.

  1. Step 1: Aggregate payroll costs (defined in detail below in f.) from the last twelve months for employees whose principal place of residence is the United States.
  2. Step 2: Subtract any compensation paid to an employee in excess of an annual salary of $100,000 and/or any amounts paid to an independent contractor or sole proprietor in excess of $100,000 per year.

iii. Step 3: Calculate average monthly payroll costs (divide the amount from Step 2 by 12).

  1. Step 4: Multiply the average monthly payroll costs from Step 3 by 2.5.
  2. Step 5: Add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020, less the amount of any “advance” under an EIDL COVID-19 loan (because it does not have to be repaid).

You are also eligible for a PPP loan if you are an individual who operates under a sole proprietorship or as an independent contractor or eligible self-employed individual, you were in operation on February 15, 2020. You must also submit such documentation as is necessary to establish eligibility such as payroll processor records, payroll tax filings, or Form 1099-MISC, or income and expenses from a sole proprietorship. For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.

The proceeds of a PPP loan are to be used for:

  • payroll costs (as defined in the Act and in 2.f.);
  • costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
  • iii. mortgage interest payments (but not mortgage prepayments or principal payments);
  • rent payments;
  • utility payments;
  • interest payments on any other debt obligations that were incurred before February 15, 2020; and/or refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020.
  • If you received an SBA EIDL loan from January 31, 2020 through April 3, 2020, you can apply for a PPP loan. If your EIDL loan was not used for payroll costs, it does not affect your eligibility for a PPP loan. If your EIDL loan was used for payroll costs, your PPP loan must be used to refinance your EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan.

Yes. At least 75 percent of the PPP loan proceeds shall be used for payroll costs. For purposes of determining the percentage of use of proceeds for payroll costs (but not for forgiveness purposes), the amount of any refinanced EIDL will be included. The rationale for this 75 percent floor is contained in the First PPP Interim Final Rule

Payroll costs include:

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
  • Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
  • State and local taxes assessed on compensation; and
  • For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

Yes. The Act expressly excludes the following:

  • Any compensation of an employee whose principal place of residence is outside of the United States;
  • The compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessary;
  • Federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020, including the employee’s and employer’s share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees; and
  • Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116–127).

The amount of loan forgiveness can be up to the full principal amount of the loan plus accrued interest. The actual amount of loan forgiveness will depend, in part, on the total amount spent over the covered period on:

  1. payroll costs including salary, wages, and tips, up to $100,000 of annualized pay

per employee (for eight weeks, a maximum of $15,385 per individual), as well as

covered benefits for employees (but not owners), including health care expenses,

retirement contributions, and state taxes imposed on employee payroll paid by the

employer (such as unemployment insurance premiums);

  1. owner compensation replacement, calculated based on 2019 net profit as

described above, with forgiveness of such amounts limited to

eight weeks’ worth (8/52) of 2019 net profit, but excluding any qualified sick

leave equivalent amount for which a credit is claimed under section 7002 of the

Families First Coronavirus Response Act (FFCRA) (Public Law 116-127) or

qualified family leave equivalent amount for which a credit is claimed under

section 7004 of FFCRA;

iii. payments of interest on mortgage obligations on real or personal property

incurred before February 15, 2020, to the extent they are deductible on Form 1040

Schedule C (business mortgage payments);

  1. rent payments on lease agreements in force before February 15, 2020, to the extent

they are deductible on Form 1040 Schedule C (business rent payments); and

  1. utility payments under service agreements dated before February 15, 2020 to the

extent they are deductible on Form 1040 Schedule C (business utility payments).

In addition to the borrower certification required by Section 1106(e)(3) of the Act, to substantiate your request for loan forgiveness, if you have employees, you should submit Form 941 and state quarterly wage unemployment insurance tax reporting forms or equivalent payroll processor records that best correspond to the covered period (with evidence of any retirement and health insurance contributions). Whether or not you have employees, you must submit evidence of business rent, business mortgage interest payments on real or personal property, or business utility payments during the covered period if you used loan proceeds for those purposes. The 2019 Form 1040 Schedule C that was provided at the time of the PPP loan application must be used to determine the amount of net profit allocated to the owner for the eight-week covered period.

The proceeds of a PPP loan are to be used for the following.

  1. Owner compensation replacement, calculated based on 2019 net profit as

described above.

  1. Employee payroll costs (as defined in the First PPP Interim Final Rule) for

employees whose principal place of residence is in the United States, if you have

employees.

iii. Mortgage interest payments (but not mortgage prepayments or principal

payments) on any business mortgage obligation on real or personal property (e.g.,

the interest on your mortgage for the warehouse you purchased to store business

equipment or the interest on an auto loan for a vehicle you use to perform your

business), business rent payments (e.g., the warehouse where you store business

equipment or the vehicle you use to perform your business), and business utility

payments (e.g., the cost of electricity in the warehouse you rent or gas you use

driving your business vehicle). You must have claimed or be entitled to claim a

deduction for such expenses on your 2019 Form 1040 Schedule C for them to be a

permissible use during the eight-week period following the first disbursement of

the loan (the “covered period”). For example, if you did not claim or are not

entitled to claim utilities expenses on your 2019 Form 1040 Schedule C, you

cannot use the proceeds for utilities during the covered period.

  1. Interest payments on any other debt obligations that were incurred before

February 15, 2020 (such amounts are not eligible for PPP loan forgiveness).

  1. Refinancing an SBA EIDL loan made between January 31, 2020 and April 3,

2020 (maturity will be reset to PPP’s maturity of two years). If you received an

SBA EIDL loan from January 31, 2020 through April 3, 2020, you can apply for a

PPP loan. If your EIDL loan was not used for payroll costs, it does not affect your

eligibility for a PPP loan. If your EIDL loan was used for payroll costs, your PPP

loan must be used to refinance your EIDL loan. Proceeds from any advance up to

$10,000 on the EIDL loan will be deducted from the loan forgiveness amount on

the PPP loan.

  1. Step 1: Compute 2019 payroll by adding the following:
  2. Your 2019 Form 1040 Schedule C line 31 net profit amount (if you have not

yet filed a 2019 return, fill it out and compute the value), up to $100,000

annualized, if this amount is over $100,000, reduce it to $100,000, if this

amount is less than zero, set this amount at zero;

  1. 2019 gross wages and tips paid to your employees whose principal place of

residence is in the United States computed using 2019 IRS Form 941 Taxable

Medicare wages & tips (line 5c- column 1) from each quarter plus any pre-tax

employee contributions for health insurance or other fringe benefits excluded

from Taxable Medicare wages & tips; subtract any amounts paid to any

individual employee in excess of $100,000 annualized and any amounts paid

to any employee whose principal place of residence is outside the United

States; and

  1. 2019 employer health insurance contributions (health insurance component of

Form 1040 Schedule C line 14), retirement contributions (Form 1040

Schedule C line 19), and state and local taxes assessed on employee

compensation (primarily under state laws commonly referred to as the State

Unemployment Tax Act or SUTA from state quarterly wage reporting forms).

  1. Step 2: Calculate the average monthly amount (divide the amount from Step 1 by 12).

iii. Step 3: Multiply the average monthly amount from Step 2 by 2.5.

  1. Step 4: Add the outstanding amount of any EIDL made between January 31, 2020

and April 3, 2020 that you seek to refinance, less the amount of any advance

under an EIDL COVID-19 loan (because it does not have to be repaid).

You must supply your 2019 Form 1040 Schedule C, Form 941 (or other tax forms or

equivalent payroll processor records containing similar information) and state quarterly

wage unemployment insurance tax reporting forms from each quarter in 2019 or

equivalent payroll processor records, along with evidence of any retirement and health

insurance contributions, if applicable. A payroll statement or similar documentation from

the pay period that covered February 15, 2020 must be provided to establish you were in

operation on February 15, 2020.

  1. Step 1: Find your 2019 IRS Form 1040 Schedule C line 31 net profit amount (if

you have not yet filed a 2019 return, fill it out and compute the value). If this

amount is over $100,000, reduce it to $100,000. If this amount is zero or less,

you are not eligible for a PPP loan.

  1. Step 2: Calculate the average monthly net profit amount (divide the amount from

Step 1 by 12).

iii. Step 3: Multiply the average monthly net profit amount from Step 2 by 2.5.

  1. Step 4: Add the outstanding amount of any Economic Injury Disaster Loan

(EIDL) made between January 31, 2020 and April 3, 2020 that you seek to

refinance, less the amount of any advance under an EIDL COVID-19 loan

(because it does not have to be repaid).

Regardless of whether you have filed a 2019 tax return with the IRS, you must provide

the 2019 Form 1040 Schedule C with your PPP loan application to substantiate the

applied-for PPP loan amount and a 2019 IRS Form 1099-MISC detailing nonemployee

compensation received (box 7), invoice, bank statement, or book of record that

establishes you are self-employed. You must provide a 2020 invoice, bank statement, or

book of record to establish you were in operation on or around February 15, 2020.

Below are forms, provided by Mark Christian, businesses may want to fill out to before going online to make the application process faster and easier to understand.