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Coronavirus Relief Loan – The CARES Act’s Paycheck Protection Program (PPP)

We’re here to help keep you informed. Answers will be updated as new details become available based on guidance from the US Treasury Dept., the Small Business Administration, and lenders processing and issuing PPP loans.

Read the PPP archived daily updates from BoeFly’s CEO, Mike Rozman

The amount of forgiveness of a PPP loan depends on the amount of the loan proceeds spent on the borrower’s payroll costs (and other eligible expenses) over an eight-week period; when does that eight-week period begin?

The eight-week period begins on the date the lender makes the first disbursement of the PPP loan to the borrower.

View the Loan Forgiveness Webinar here, and learn the most important tips to maximize your loan forgiveness.

What counts as “payroll costs?”
  • Salaries (up to $100,000* for any employee), wages, commissions or similar compensation, cash tips or equivalent, paid vacations, paid sick, parental and family medical leave
  • Allowance for dismissal or separation
  • Group health costs including insurance premiums
  • Retirement benefits
  • State and local payroll taxes

Any amounts that an eligible borrower has paid to an independent contractor or sole proprietor should be excluded from the eligible business’s payroll costs. However, an independent contractor or sole proprietor will itself be eligible for a loan under the PPP, if it satisfies the applicable requirements.

Rent does not count as “payroll costs” and should not be included in your loan calculations. However, proceeds from the loan can be used for working capital.

* The exclusion of compensation more than $100,000 annually applies only to cash compensation, not to non-cash benefits, including:

  • employer contributions to defined-benefit or defined-contribution retirement plans;
  • payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums; and
  • payment of state and local taxes assessed on compensation of employees.
Should independent contractors (1099 employees) be included in the payroll costs?

No. Any amounts that an eligible borrower has paid to an independent contractor (1099 employee) or sole proprietor should be excluded from the eligible business’s payroll costs. However, an independent contractor or sole proprietor will itself be eligible for a loan under the PPP, if it satisfies the applicable requirements.

How do I account for federal taxes when determining payroll costs?

Under the Act, payroll costs are calculated on a gross basis without regard to (i.e., not including subtractions or additions based on) federal taxes imposed or withheld, such as the employee’s and employer’s share of Federal Insurance Contributions Act (FICA) and income taxes required to be withheld from employees.

As a result, payroll costs are not reduced by taxes imposed on an employee and required to be withheld by the employer, but payroll costs do not include the employer’s share of payroll tax. For example, an employee who earned $4,000 per month in gross wages, from which $500 in federal taxes was withheld, would count as $4,000 in payroll costs. The employee would receive $3,500, and $500 would be paid to the federal government. However, the employer-side federal payroll taxes imposed on the $4,000 in wages are excluded from payroll costs under the statute.

Will the lender replicate my payroll calculations?

No. Providing an accurate calculation of payroll costs is the responsibility of the borrower, and the borrower must attest to the accuracy of those calculations. Lenders are expected to perform a good faith review, in a reasonable time frame, of the borrower’s calculations and supporting documents concerning average monthly payroll cost. The level of diligence by a lender should be informed by the quality of supporting documents supplied by the borrower. Minimal review of calculations based on a payroll report by a recognized third-party payroll processor, for example, would be reasonable.

If lenders identify errors in the borrower’s calculation or material lack of substantiation in the borrower’s supporting documents, the lender should work with the borrower to remedy the error.

Let’s get started

Simply click on the APPLY NOW button, and you will be taken to a secure portal where you can fill out your application to start your loan request. Millions of businesses will apply, swamping the majority of lenders. Using our dynamic compatibility technology, we only match loans with lenders ready to close, so you get your loan as soon as possible.

NOTE: You can take a Paycheck Protection Program loan and an SBA Disaster Relief Loan (EIDL) only IF the EIDL loan is used for purposes other than what’s covered by the Paycheck Protection Program loan.

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