Paycheck Protection Update for 4/8/2020

The Small Business Administration issued FAQs on April 6 in response to demands from banks and borrowers to provide greater clarity as to what information is required for purposes of obtaining a Paycheck Protection Program loan. Many of these FAQs address how a business should determine its payroll costs.

Among the questions answered, the FAQs clarify that:

1) Some banks have been asking for Trailing-Twelve-Month (TTM) payroll information to calculate Average Monthly Payroll.
* The SBA has clarified that most borrowers can simply use Calendar Year 2019 payroll to calculate Payroll Costs. (Although the SBA says the borrower may choose to use a current TTM payroll, if they choose to do so).

2) Some banks were incorrectly subtracting Federal Withholding, Employee FICA, or Heath Insurance contributions from the calculation of Payroll Costs.
* The SBA clarified that Gross Payroll should be used for the calculation of the loan amount and forgiveness. Gross Payroll is before withholding for Employee FICA, Federal WH, or Medical Benefits.

3) The SBA confirmed that Employer FICA is not included in the calculation of Payroll Costs.

4) The $100k payroll limit is for wages only. Health benefits and retirement contributions do not need to be allocated to each employee for the purpose of determining payroll over the 100k limit.

5) The $100k payroll limit is calculated on an annualized basis. So, an employee that made $50,000, but only worked for 3-months in 2019 would have half of their payroll excluded for the Average Monthly Payroll calculation.

6) Payments to independent contractors (1099’s) are NOT included in Payroll Costs. Those contractors are eligible to apply for their own loan.

Adding to the confusion, banks and even payroll providers have been offering payroll calculators and reports that contain improper calculations of the eligible Payroll Costs (mostly underestimating the loan amount). If you relied upon these PPP Loan Calculators from your payroll provider or bank, you may want to ask if you can re-submit for a better loan number before the loan is finalized.

The FAQs are available at:

In addition, the SBA has produced a summary of the affiliation rules that apply to Paycheck Protection Program loans.

The SBA’s affiliation summary is available at:

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