Paycheck Protection Program

While the Federal government is assisting small businesses through a Small Business Administration loan under the Paycheck Protection Program (PPP) via the CARES Act, there are still some issues that need to be worked through before this program can be implemented.  The SBA and the administering banks have recently come to terms on lending guidelines, so although applications may be accepted by the banks, the applications are being held at abeyance until the banks are ready to process them.  At the present time, the Fed will be funding PPP with $3.49 billion.  While the number is large, there is a concern among business owners that the money will run out.  Obviously, there is uncertainty about the potential availability of another wave of funding if the original $3.49 billion is allocated without helping all businesses that qualify and are affected.

There appear to be two schools of thought which you need to consider with regard to the ideal time to apply for the loan. The first school of thought centers around applying now before the money runs out. While you can apply now, please keep in mind that if you do, you may not receive as much of a financial benefit as you would if your business were up and running and income was flowing in.  The second school of thought centers around waiting to get the PPP money until your business is up and running, income is flowing in, and you can bring staff back to your office off of unemployment, thus recognizing a larger financial benefit for the business.  However, in this scenario, you run the risk that if you wait, the $3.49 billion currently available will be gone.

LLI cannot advise nor make this decision on behalf of any client.  We are merely presenting the positions so that each client can make their own decision.  If any client would like to proceed with the PPP application process, they are free to do so on their own, and our office will make every attempt to provide any necessary information that we have that is needed for the process.  Fortunately, the majority of the information needed is available through payroll, and the payroll companies have already been processing PPP reports.  Unfortunately, LLI is prohibited from assisting in the preparation of the loan document.  However, we will assist with providing the documentation at no additional cost, reviewing client-prepared PPP calculation and reconciliation for forgiveness as well as preparing the PPP calculation and reconciliation.  We will update you on the associated costs for reviewing or preparing the calculation.

Additional Updates and Comments:
1.    PPP loan calculation: Clearly, some ambiguities related to the payroll cost calculation still exist, specifically with which payroll look-back period to use (calendar year 2019 or fiscal year ended February or March 2020) as well as which retirement plan benefits amounts to use.  With regard to loan forgiveness, we don’t know if the retirement plan payments must have been paid or just incurred.  Without official guidance, owners and advisors are using their best interpretations of the law to make decisions.

Finally, the payroll cost calculation has been amended as follows:

  • a.    Excluded from payroll costs are federal employment taxes imposed or withheld between February 15, 2020, and June 30, 2020, including the employee’s and employer’s share of FICA and Medicare tax and income taxes required to be withheld from employees.  While it is unclear whether these amounts are excluded for loan forgiveness, it appears that they are excluded since these amounts cannot be determined for loan calculation.  This could mean that the amount to be forgiven will be lower than the amount borrowed because the amount borrowed is based on gross pay and the amount forgiven is based on net pay.  Makes no sense so stay tuned…
  • b.    Since 1099 independent contractors can file for their own PPP loan, they are excluded from the payroll costs.

2.    There is some speculation that the SBA has stated that borrowers can apply and be approved for the loan but defer the receipt of funds.  We do not see this guidance in the interim regulations, but if true, it may be at each bank’s discretion. We feel this will be a harder process for bigger banks like Chase or Bank of America to do.

3.    After April 3, 2020, it is being reported that EIDL loans are not permitted in conjunction with PPP loans.  However, it is unclear how businesses who have already applied for EIDL loans to get the $10,000 emergency grant (or applied for the EIDL for other needs) will be affected by this change since most practices have not yet received the $10,000 or EIDL approval.  Stay tuned for more details.

4.    Federal unemployment for self-employed and corporate officers otherwise ineligible for state unemployment: Under Title II Subtitle A Section 2102 of CARES Act, the federally funded Pandemic Unemployment Assistance program provides UI benefits to individuals not otherwise eligible for UI benefits and who are 1) able to work except that they are unemployed or 2) unable to work due to COVD-19 including their inability to go to work because the place of employment is closed.  It includes self-employed and individuals who otherwise would not qualify for regular unemployment.  This would include business owners who would not be eligible for state unemployment.  We are recommending that business owners apply for Federal unemployment through their State Department of Labor but understand that the websites might not yet be ready to administer this Federal unemployment.  We cannot say for certain that you will get the Federal unemployment, but you should apply.

5.    Landlords: If you own your business real estate and your business (or any other tenant(s)) have been unable to pay their rent to you (or your real estate entity), you may be eligible for the SBA $10,000 emergency grant due to economic loss from the COVD-19 disaster.

6.    NJEDA Small Business Emergency Assistance Loan: Application submission opens April 13, 2020 at 9:00AM

7.    NYC Small Business Continuity Loan Fund

If you have any questions, we encourage you to schedule a 30-minute consultation with us.  To schedule, please email us at

Stay safe and healthy, and please help others where you can. We’ll continue to provide updates as we have them.

LLI Advisory Group provides this information as a service to clients and other friends for informational purposes only. It should not be construed or relied on as legal or tax advice.


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