SBA Releases Official Details of Paycheck Protection Program

SBA Releases Official Details of Paycheck Protection Program 
The U.S. Small Business Administration (SBA) released the official rule for the $349 billion Paycheck Protection Program (PPP), including the formula for calculating loan amounts and what the loan can cover. Small businesses and sole proprietors can begin applying for the federal loans through their lenders today. Independent contractors and self-employers can apply beginning April 10.

Under the rule, businesses with 500 or fewer employees and 501(c)3 organizations are eligible to apply as long as they were in operation on Feb. 15, 2020. Sole proprietors and independent contractors are also eligible, but independent contractors need to apply themselves. A company cannot apply on behalf of a contractor.

The maximum loan amount is $10 million at an interest rate of 1% and a two-year term. PPP loans will be provided on a first-come-first served basis, so we recommend contacting your current lender as soon as possible to apply. Lenders will prioritize their current customers’ applications. If you do not have a current lender or your lender is not participating, see the SBA’s tool to find eligible lenders. On our website, we also have a list of Chamber members that we know are participating lenders.

The following items qualify as payroll costs.

  • Compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions or similar compensation
  • Cash tips or the equivalent
  • Payment for vacation, parental, family, medical or sick leave
  • Allowance for separation or dismissal
  • Payment for employee benefits, such as group health care coverage, including insurance premiums and retirement
  • Payment for state and local taxes assessed on employees’ compensation

For independent contractors or sole proprietors, qualifying costs include wage, commissions, income or net earnings from self-employment or similar compensation.

Twenty-five percent of the loan can also be used to pay for:

  • Mortgage interest
  • Rent
  • Utilities
  • Interest on any other debt obligations that were incurred before Feb. 15, 2020
  • Refinancing an SBA Economic Injury Disaster Loan (EIDL) made between Jan. 31, 2020, and April 3, 2020

To calculate your loan amount, use the following formula.

  1. Calculate the wages, salary and commissions from the last 12 months.
  2. Subtract any earnings for an individual that are in excess of $100,000.
  3. Add all employer paid group health care and retirement plan costs.
  4. Include local/municipal fees, e.g. Denver Occupational Privilege Tax.
  5. Do NOT include federal or state paid employer paid taxes.
  6. Divide your answer by 12.
  7. Multiply the average monthly payroll costs from Step 3 by 2.5.
  8. Add the outstanding amount of your Economic Injury Disaster Loan, if you received one between Jan. 31, 2020, and April 3, 2020, minus the amount of any “advance” you received for that loan. (That advance does not have to be repaid.

To see specific examples of how to calculate the loan amount, view pages 9-10 of the interim rule.

The loans may be fully or partially forgiven if the money is used for payroll, health care premiums, rent, mortgage interest or utilities over the 8-week period following origination, AND the employer either continues to employ workers or rehires them when the business reopens. However, no more than 25% of the loan forgiveness amount may be for non-payroll costs.

Your lender will need you to submit an application and payroll documentation.

Read more about the SBA Paycheck Protection Program on the SBA website or visit our COVID-19 Business Resource Center.

You can also contact our Denver Metro Small Business Development Center at info@denversbdc.org or the Small Business COVID-19 Disaster Response Hotline at (303) 860-5881 for more information.

Register Today for Monday’s Webinar on Applying for Paycheck Protection Loans  
Join the Denver Metro Chamber, the Denver Metro Small Business Development Center and Colorado Lending Source, a Small Business Administration-approved lender, for an in-depth guide to the loan application process for the federal Paycheck Protection Program.

Monday, April 6  
Noon to 1 p.m.

Mike O’Donnell, Executive Director, Colorado Lending Source

Governor Extends Sales Tax Deadline for Businesses to May 20  
Gov. Jared Polis announced an extension to May 20 for businesses to file their sales tax returns. Visit the Colorado Department of Revenue website for a list of all deadlines.

Save the Date for Webinar on Managing Employees During COVID-19 
Join us to learn best practices for managing remote employees. This webinar will offer tips to keep your staff engaged and productive while maintaining their mental wellness through the COVID-19 crisis.

Thursday, April 16 
11 a.m. to Noon

James McDonough, HR Research Consultant, Member Engagement, Employers Council
Carl Clark, M.D., President/CEO, Mental Health Center of Denver

Save the date. Registration information to come.

View upcoming COVID-19 webinars on the Chamber’s COVID-19 website. Also view recordings of past webinars:

For More Resources 
Our COVID-19 Business Resource Center has the latest news, resources and information for business owners, employers and workers. Visit www.denverchamber.org/COVID.

Kelly Brough is the president and CEO of the Denver Metro Chamber.