The SBA PPP Loan: Quick Tips and Helpful Advice

By May 5, 2020 No Comments

The Small Business Administration’s Paycheck Protection Program for many businesses seems like a much neededfinancial rescue. Allocating $349 billion for small businesses inforgivable loans for payroll and overhead, the program offersloans of up to $10 million at 1% interest to companies and nonprofits with fewer than 500 workers to cover two months of payroll and overhead expenses. And the best part is that if the borrower retains workers and doesn’t cut their wages, the government will forgive most or all of the loan and repay bank lenders. 

So how do you take advantage of this program. Here are some quick tips:

Make Sure Your Bank Has Completed Their PPP Loan Application. If your bank has not yet completed the PPP paperwork, they cannot take your application. Yes, you can go to another bank, however, because of the overwhelming amount of applications, many banks are only working with existing customers.

Calculate Your Loan Amount Correctly. While the simple answer is to take your average monthly payroll from the last quarter of 2019, when you filed taxes, and multiply it by 2.5 ,there are a few more important points. You will want to include things like commission tips, vacation pay, medical, parental, and sick pay. Also include healthcare benefits, insurance premiums, both employer and employee contributions to a retirement program, and state and local payroll taxes paid. Here is what you should not include: the employer-paid portion of federal payroll taxes known as FICA (e.g. social security and medicare payroll taxes), and Roth contributions or other after-tax contributions made by an employee – these are already included in form 941 box 2 under wages paid.

Submit Your 941 Payroll Forms With Your Loan Application. As many small businesses rely on their 941 payroll reports to calculate payroll amounts, these should also be submitted with your loan application. Failure to do so could hold up your application and approval.

The application form can be found at:–lender-application-form-paycheck-protection-program-loan-guaranty-0

After completing an application, be aware that a successful application does not necessarily mean a successful approval. The review process can take up to 3 weeks, after which funds should be disbursed in 3 days. However, the process is in its’ infancy, and there are certainly some kinks to be worked out. 

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