what we're talking about

It’s official.  With the signing of the CARES Act, the race is on to prepare and apply for the new Paycheck Protection Program (“PPP”) as well as other eligible loans.  The information is flowing fast…this below information materially changed twice within a matter of a couple hours.  We just received word from the SBA with an application for the PPP.  Please follow this link (https://www.sba.gov/document/sba-form–paycheck-protection-program-ppp-sample-application-form) and begin to pull together your application information minus the payroll calculation.

It now appears banks will accept applications beginning as early as this Friday, April 3. Even following the guidance from the SBA we will not be surprised if it takes the banks some time to organize internally before we see meaningful responses and momentum.  While the applications are being reviewed and processed, we still encourage you to determine potential bridge financing solutions in the event your forecasted cash position can’t sustain significant delays within the above timeframe.

As for understanding the terms of the new PPP loan program, we will be the first to say we, unfortunately, still do not have all the answers… that’s what you can expect when politicians write a financial bill.  We are certainly closer now than we were twenty-four hours ago.   That said, this will not and should not keep us from making significant progress in preparation.

Here is our proposed game plan for those interested in applying for the PPP loan.

GAMEPLAN

We can begin work by aggregating the necessary payroll information and following the checklist below:

Here’s a quick summary checklist

• Review the good faith certifications below and ensure you can and will comply.
• Contact your Inflammo Account Manager to initiate the initial support, documentation and calculations.
• Work with Inflammo to aggregate payroll filing information which will likely be required.
• Reach out to your financial institution regarding the CARES Act PPP loan program.  Determine if your institution is a SBA 7(a) institution and will be facilitating the PPP program.
• If your financial institution is participating, inquire of the application process.

Here’s the checklist in more detail

First, ensure you can make a good faith certification that you and your company:

• Were impacted by the uncertainty of current economic conditions making the loan request necessary to support ongoing operations.
• Will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease and utility payments.
• Do not have a pending application for a loan duplicative of the purpose and amounts applied for under the PPP.
• From February 15, 2020 to December 31, 2020, have not received a loan duplicative of the purpose and amounts applied for under the PPP.

Next, please contact your Inflammo Account Manager if you are interested in applying for a PPP loan.

• We have developed a template and calculator we will use for purposes of documenting and supporting the payroll calculations and potential loan amounts.  This calculator will be flexible and will be changed following official guidance from the SBA and participating banks.
• To the extent we provide payroll processing services, we will begin accumulating what we believe to be required documentation to support your payroll such as Quarterly 941 filings and other payroll reports.  If we do not provide payroll processing support for you and your company, we will request the documents from you directly.

Lastly, the PPP loans will be administered by financial institutions and not directly through the SBA.  We encourage you to reach out to your existing financial institution to determine if your bank is a SBA 7(a) accredited institution, which we expect to be the primary source for the origination and sourcing of these loans.  If your financial institution does not participate in SBA 7(a) lending, please let us know and we can facilitate appropriate intros on our end.

Each financial institution may very well have different application requirements; however, the substantial requirement around payroll and loan request should be consistent.  Please refer to the link above.

TO BE DETERMINED

The list below summarizes a few of the unanswered questions we are researching:

1. Under the calculation of payroll costs:

• Does “payment of state or local tax assessed on the compensation of the employee” mean to include State unemployment insurance?

1. Under the payroll costs to be excluded:

• Clarify what is meant by the “as prorated for the period February 15, to June 30, 2020” in reference to the excess of compensation > $100k annually?  Is this caveat for purposes of the loan calculation or for the measurement of forgiveness as the period is prospective?

As always, please do not hesitate to contact us with any questions.  We will remain in contact with our professional networks and will relay all relevant information to you as we learn more.

Inflammo reminds readers that this summary is for informational purposes only. It is not legal advice or accounting advice specific to the readers’ businesses. Inflammo reserves the right to revise this summary as new information and analyses become available.