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Paycheck Protection Program: All About Financial Assistance For Small Businesses

Updated : August 4th, 2020

The Coronavirus pandemic outbreak has affected the Americans like never before. Many businesses have shut down, and millions of people have lost their employment. To provide Americans with economic assistance, the U.S. Congress has passed the Coronavirus Aid, Relief, and Economic Security (CARES) act. This act offers unemployment benefits to the unemployed in addition to supporting business operations through the Paycheck Protection Program (PPP). 

What Is a Paycheck Protection Program?

The CARES Act includes a $2 trillion stimulus package that provides financial relief. While a portion of the package is given as unemployment benefits, about $349 billion is dedicated to the Paycheck Protection Program. This program provides federally guaranteed loans to businesses to cover their payroll and other costs.

Which Businesses Qualify For The Paycheck Protection Program?

Not all businesses qualify for the Paycheck Protection Program. Only those with 500 employees or fewer are eligible for PPP. This includes independent contractors, sole proprietorships, private non-profits, the self-employed, and 501(c)(19) veterans organizations. For the hospitality and foodservice industries (with a NAICS 72 code), the limit of employees may vary with the location.

Additional Eligibility Requirements

To receive the loan, you must also meet additional requirements. This includes:

  • Your business was in operation on February 2020
  • You have paid the payroll taxes and employed salaries 
  • You have paid your independent contractors

Which Businesses Do Not Qualify for the Paycheck Protection Program?

Though some businesses have 500 or fewer employees, they still do not qualify for the PPP loan. These include:

  • Businesses who lend, invest or speculate (Banks and investment companies)
  • Passive businesses (Landlords)
  • Political and policy lobbyists
  • Multi-level marketers
  • Gambling and marijuana businesses
  • Businesses who promote religion
  • Household employers 

What Can the Loans Be Used For?

You can use the loans for:

  • Payroll purposes including employee benefit costs (like health insurance and retirement contributions)
  • Rent or under lease agreements in force before February 15, 2020
  • Interest on mortgage obligations that incurred before February 15, 2020
  • Utilities for which the service started before February 15, 2020

What Is Counted As Payroll Costs?

Payroll costs include:

  • Wages, salary, tips, or commissions (capped at $100,000 yearly per employee)
  • Compensation to or income for an independent contractor or sole proprietor that is less than $100,000 
  • Employee benefits including parental, medical or sick leave, or costs for vacation, 
  • Allowance for dismissal or separation or dismissal
  • Local or state taxes imposed on employee compensation
  • Retirement benefits

Where Can You Apply For A Loan?

You can apply for a loan through any Small Business Administration (SBA) lender. The SBA collaborates with about 1,800 local lenders to provide loans. 

When applying for a loan, you have to provide a good-faith certification to justify your loan request. You must acknowledge that the loan will be used to maintain payroll and retain your employees. Also, you must certify that you haven’t received any loan under the Paycheck Protection Program or have any loan applications pending. 

Documents Required While Applying For A Loan  

You must submit a copy of the following documents while applying for a loan.

  1. 940, 941 or 944 payroll tax reports or Form W-3 or Schedule C of 2019.
  2. Payroll reports for the 12-months of 2019 that show the gross wages for each employee, including 
  3. Paid time off for each employee
  4. Family medical leave pay for each employee
  5. Vacation pay for each employee
  6. State and local taxes imposed on each employee’s compensation

    Will The Loan Be Forgiven? 

    Yes. Complete or portion of your loan may be forgiven, provided you use it on eligible expenses. When you receive the loan, you have 8 weeks to utilize the loan.

    Note –

    The loan has a 1% interest rate and maturity of 2 years. 

    Neither the federal nor local lender charges any fee during the process.

    How To Request Loan Forgiveness?

    You can request loan forgiveness by applying it to your local lender. Your application should include: 

    • Documents that determine the number of full-time equivalent employees on your payroll 
    • State income, payroll, and unemployment insurance (UI) filings
    • Payroll tax filings reported to the Internal Revenue Service (IRS)
    • Documents that verify payments on covered lease and mortgage obligations 
    • Documents that verify covered utility payments

    The lender can take up to 60 days to decide on your application. If approved, the lender will report the expected forgiveness amount to the SBA. The SBA will forgive the loan within 15days. 

    How Much Amount Can A Business Receive? 

    You can receive a loan that is 2.5 times your average monthly payroll. The amount is capped at $10 million. The loan amount is calculated by considering your average monthly payroll for January and February 2020 for new businesses or the previous year for old businesses. 

    The Paycheck Protection Program is expected to end on June 30, 2020. If you meet the eligibility requirements, then quickly file for a loan and get benefited.  

     

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    1. AUGUST 11, 2020

      The Virginia Employment Commission has proven to be extremely unresponsiveness. I applied for unemployment benefits on June 1, 2020 and was surprisingly advised that my claim was denied because there was no record of my employment during the base year of January 1, 2019 – December 31, 2019. However, not only was I employed through the year of 2019, I also filed my state taxes for 2019 in spring of this year and received a refund from the state. Therefore, it is bizarre that the Virginia Employment Commission/Commonwealth of Virginia would have no record of my employment for 2019.

      I appealed this decision on June 17, 2020 via VEC’s web site, via fax, and via mail (USPS) and, almost two months later, I have yet to hear from anyone at VEC with regard to the status of my appeal. I have also not been able to connect with anyone by phone or via chat on VEC’s web site. On July 28, 2020, I applied for Virginia’s Pandemic Emergency Unemployment Compensation and have yet to receive a response concerning my application.

      VEC has demonstrated VERY POOR CUSTOMER SERVICE and it is my hope that someone will finally follow-up with me.

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