Most businesses have come to a screeching halt due to the coronavirus and stay-at-home orders across the country. To help small companies to cope with reduced traffic and sales, the government has approved the Paycheck Protection Program (PPP) to help businesses survive the shutdown. The Small Business Administration (SBA) considers the Paycheck Protection Program loans as 7(a) small business loans where business owners may apply for up to a $10 million loan that has a maturity of 2 years, incurring an interest rate of 1%. Bryant Consultants is providing answers to questions about how the Paycheck Protection Program loan can be used.
What is included in eligible payroll costs?
The amount borrowed under the Payroll Protection Program can only be used for payroll costs, rent, interest on mortgages, and utilities for your small business. When at least 75% of the funds are uow ased for eligible payroll costs, the Paycheck Protection Program loan could be forgivable.
Below are the eligible payroll costs inclusions:
- Paid time off
- Retirement benefits
- State and local taxes
- Allowance for dismissal
- Payment of cash tips or equivalent
- Paid parental, medical, family, or sick leave
- Group healthcare benefits and insurance premiums
- Gross payroll (including FICA and federal withholding)
- Employee salaries, commissions, or wages that do not exceed a threshold of $100,000 per year
What is excluded from the eligible payroll costs?
Paycheck Protection Program funds that are used for excluded costs may not count towards the 75% for loan forgiveness qualification. According to the Small Business Administration, funds obtained through a 7(a) loan could be used for the purchase of land, buildings, supplies, machinery, equipment, refinancing current business debt, or used as working capital. However, due to the nature of the circumstances and loan specifics, using funds on the above items may cause disqualification of Paycheck Protection Program loan forgiveness by the federal government.
Below are a few additional excluded payroll costs:
- Compensation for employees who live outside of the U.S.
- Individual employee compensation that is over $100,000 per year
- Qualified sick leave under the Families First Coronavirus Response Act
- Income for sole proprietors, self-employed workers, or independent workers that is greater than $100,000 per year
A government-provided Paycheck Protection Program loan could help keep your small business employees paid during this time of struggle due to the coronavirus. However, along with the loan comes discretion about how to apply the funds to your small business most effectively and with possible loan forgiveness in mind. If you are a small business owner, have applied for the Paycheck Protection Program, and need assistance with effectively applying the funds to your small business, feel free to contact a small business mentor at Bryant Consultants. With over 20 years of combined experience consulting small businesses, we invite you to call us today at (877) 768-4799 or contact us online for a free consultation about how we can effectively help your small business succeed. We also will continue to provide frequent updates throughout the coronavirus pandemic. To make sure you receive these updates, follow us on Facebook and Instagram.
