What is a Paycheck Protection (PPP) Loan?
PPP loans provide funds to small businesses to keep employees on payroll. The loan is forgiven if the employer keeps all employees on payroll for twenty-four weeks. The funds must be used directly for payroll, rent, mortgage interest, or utilities (at least 60% of the available funds must be used for payroll in order to have the loan forgiven by the SBA).
About Paycheck Protection Program Loan
- Businesses or entities that have been operating since February 15, 2020 are eligible
- Any small business concern that meets SBA’s size standards (either the industry-based sized standard or the alternative size standard)
- Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the lesser of:
- 500 employees
- or that meets the SBA industry size standard, if more than 500
- Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
- Sole proprietors, independent contractors, and self-employed persons
UKRFCU will begin reviewing application from existing business account holders on April 28, 2020.
An application will only be processed once all requested documentation is received. A complete application includes the following:
- A completed SBA application
- For businesses applying for a PPP Loan:
- 941 Quarterly Tax Filings (2019, 2020 Q1)
- 944 Annual Tax Filings (2019)
- Payroll Register for the previous 12 months
- 12 months most recent bank statements
- For 1099 Independent Contractors or self-employed individuals applying for a PPP loan:
- IRS 1040 Schedule C
- 1099s (under which you were paid)
- Income and expense reports for 2019
- For all applicants
- Business account bank statements
- Any other document that can prove your payroll expenses
The loan can be used for:
- Payroll costs:
- Salary, wages, commissions, tips, or equivalent.
- Employee Benefits, including paid time off, allowance for dismissal, associated costs for group health care benefits, including insurance premiums.
- Retirement benefits.
- State and local taxes assessed by employee compensation.
- Interest payments on mortgage obligations (this does NOT include prepayment of or payment of principal on mortgage obligations).
- Rent, including rent under lease agreements – must have been in force before February 15, 2020.
- Utilities – must have been in force from February 15, 2020.
- Interest on other debt obligations that were incurred before February 15, 2020.
Your loan is eligible to be forgiven by the SBA if the funds are used for the following items during the twenty-four week period:
- Payroll costs (at least 60% of the loan must be used for payroll costs)
- Interest on your mortgage obligation incurred during the ordinary course of business
- Rent on a leasing agreement
- Utility payments (gas, water, electricity, telephone/internet, transportation)
- Additional wages paid to tipped employees
- A borrower is eligible for a Second Draw PPP Loan if the borrower:
- Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses.
- Has no more than 300 employees; and
- Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
- For all Applicants other than those satisfying the conditions set forth below, Applicants must demonstrate that gross receipts in any quarter of 2020 were at least 25% lower than the same quarter of 2019. Alternatively, Applicants may compare annual gross receipts in 2020 with annual gross receipts in 2019; Applicants choosing to use annual gross receipts must enter “Annual” in the 2020 Quarter and Reference Quarter fields and, as required documentation, must submit copies of annual tax forms substantiating the annual gross receipts reduction.
- For Applicants not in business during the first and second quarters of 2019 but in operation during the third and fourth quarters of 2019, Applicants must demonstrate that gross receipts in any quarter of 2020 were at least 25% lower than either the third or fourth quarters of 2019.
- For Applicants not in business during the first, second, and third quarters of 2019 but in operation during the fourth quarter of 2019, Applicants must demonstrate that gross receipts in any quarter of 2020 were at least 25% lower than the fourth quarter of 2019.
- For Applicants not in business during 2019 but in operation on February 15, 2020, Applicants must demonstrate that gross receipts in the second, third, or fourth quarter of 2020 were at least 25% lower than the first quarter of 2020.
- Has 2020 Business Returns Completed.
- Had their first loan forgiven by the SBA.
Your maximum PPP loan amount will be 2.5 times your average monthly payroll costs, up to $10 million (Last 12 months are utilized).
Interest rate for PPP loans is 1% and is assigned by the SBA.
Maximum loan maturity is 60 months.
Payments are deferred by 6 months (Interest continues to accrue during this period).
Deadline to apply for a PPP loan is June 30, 2020.
There are no charges to the borrower when obtaining an SBA loan.