Ahead of the April 27th resumption of the Paycheck Protection Program (PPP) loan application process, the Small Business Association (SBA) just released new guidance on one of the trickier aspects of the program: calculating payroll costs.
The total amount any small business may borrow through a PPP loan is 2.5 times its average monthly payroll costs incurred during the one-year period prior to the loan date, up to a maximum of $10 million. For businesses that were not operational in 2019, they can borrow up to 2.5 times their average total monthly payroll costs incurred for January and February 2020
These funds are intended to cover eight weeks of payroll expenses and any additional amounts needed to make payments towards debt and certain other specified obligations.
Since loan amounts are correlated to a borrower’s payroll costs, applicants must calculate those costs accurately and have the documentation available to support those figures when requesting PPP funds.
The SBA’s April 24th guidance outlines the methodology that different types of applicants, like self-employed individuals, partnerships, S and C corporations, LLCs, and non-profit organizations, should use when determining their payroll costs and the corresponding amount of their loan request.
If you have questions regarding obtaining loans through the Paycheck Protection Program or have any other concerns or issues related to the COVID-19 pandemic, please contact the Business Law Practice Group at Kreis Enderle today.