An Easy Step by Step Guide by a Business Lawyer for applying for a Small Business Payroll Protection Loan – Includes the Application
We wrote last Friday about the Payroll Protection Program (The “PPP”). Using this program, you can get a deferred payment loan that can be fully forgiven if you maintain your payroll. The U.S. Department of Treasury just released the regulations, information sheet and the application itself that you need to apply for one of these loans. Applications can be submitted starting Friday April 3, 2020. The purpose of this blog post is to provide the application and a step by step guide on how to apply and get your business a forgivable loan.
I’m not charging anyone for writing these. My hope is to get this information out there to help other small businesses survive. Please share this guide, which in includes the link to the application, with any small businesses you know.
Step 1: Determine if a Payroll Protection Loan is Right for Your Small Business.
While Payroll Protection Loans will be a huge benefit to many businesses, they are not for every business. I wrote extensively about how the Payroll Protection Program works last Friday and the link is here:
The Department of Treasury’s Official Information Sheet and Overview are right here:
I’m not going to go over again everything in these resources. However, to make a long story short if your small business is situated to continue running and break even or make a small profit these programs are likely going to help you. If maintaining your payroll is going to cause you to lose money hand over fist you may be better served by something like an Economic Injury Disaster Loan (“EIDL”) because a Payroll Protection Loan may not be forgiven.
If you’re still not sure reach out for help. Having good advisors for your business is important to surviving crisis. If your business is located in Wisconsin feel free to contact the office. We are offering free thirty minute consultations for businesses with questions about Payroll Protection Loans.
Step 2: Gather the Required Information
The next step is to gather what you need to apply. This will include basic information for your business including the name, address, and Employer Identification Number (“EIN”). Your business may or may not have an EIN depending on your tax situation.
You will also need to have the names, addresses, and social security numbers of all owners. As part of the application you will need to answer whether any owner of more than 20% of the company has pending charges, a criminal history, or is on probation so gather that information as well.
Finally and most importantly you need to calculate and document your average monthly payroll costs. For most businesses this will be the Trailing 12 Months of payroll costs divided by twelve. However, Payroll costs includes more than what you believe. According to § 1102(a)(2) of the act Payroll Costs includes the following:
- (AA) salary, wage, commission, or similar compensation;
- (BB) payment of cash tip or equivalent;
- (CC) payment for vacation, parental, family, medical, or sick leave;
- (DD) allowance for dismissal or separation;
- (EE) payment required for the provisions of group health care benefits, including insurance premiums;
- (FF) payment of any retirement benefit; or
- (GG) payment of State or local tax assessed on the compensation of employees; and\
- (bb) the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in 1 year, as prorated for the covered period; and
The last one, including owner compensation for a sole proprietor or contractor, is different that most other accounting definitions of payroll costs. If you own your own business make sure to include it or you’re leaving money on the table. Payroll Costs does NOT include any amounts in excess of $100,000 per employee annualized.
You’ll also need to disclose any affiliated businesses or businesses that share management. For some owners this will be simple for others this will be complicated but if you own multiple companies be prepared to submit a full list.
Step 3: Download and Complete the Application
Once you have your paperwork together you can download the application and get to work. To do that just follow this link:
You download the pdf application and start filling it out. Most of the application is self explanatory. You can complete the boxes and addresses on the computer and then sign and initial in ink.
To complete the Average Monthly Payroll Costs you will need to divide your trailing twelve months of Payroll Costs by twelve unless you are a new or seasonal business. If your business is a new business you may use the average monthly payroll costs for January and February 2020.
You will need to have documentation to support your payroll costs above. Lenders can ask for different things but having tax returns and profit and loss statements for the relevant time period, your 941 filings, documentation of your health care and retirement costs, and copies of any 1099 forms given to independent contractors who would otherwise be employees is a great start.
Again, if you have questions regarding eligibility or how to fill out the form, reach out to a qualified accountant or business attorney for help. Both are defined as essential businesses in Wisconsin and should be able to help. If you are in the Fond du Lac, Fox Valley, or Milwaukee area don’t hesitate to call or e-mail our firm to schedule a free consultation.
Step 4: Submit to your SBA Lender
When you’ve fully completed the application you need to submit it to a lender who is qualified to underwrite SBA 7(a) loans. You can just call your banker and ask if you have a pre-existing banking relationship.
If your bank doesn’t do SBA and are in the Fond du Lac Area, I know the following lenders are terrific:
National Exchange Bank and Trust, (920)-921-7700, https://nebat.com/small-business-loans.html
Horicon Bank, 920-485-3080, https://www.horiconbank.com/government-program-loans.html
Hometown Bank, 920-907-0788, https://www.htbwi.com/SBA.aspx
Any banker who handles SBA loans is going to be swamped right now with applications. They are going to be focusing on their existing loan clients first but will be able to assist eventually. Feel free to let them know I pointed them in your direction, good relationships with bankers is important to help me serve my clients better.
Hope this helps but it is not a substitute for individualized advice from an experienced attorney. If you have questions, feel free to contact us by live chat, by phone, or using the contact us form. If you need help and are not in our area, I would recommend reaching out to a qualified local attorney or accountant. As mentioned before, we will be working to release further information as we know more, so please feel free to stop back as more programs become available.
Owner, Lakeside Legal