Preparing for the application process
**This blog has been updated as of April 7 at 1:30 CST following the additional guidance issued by the SBA, and thus altering our guidance around the $100,000 salary limit.
The launch of the Paycheck Protection Program (PPP) has been anything but streamlined. Guidance from the U.S. Treasury and the Small Business Administration (SBA) has been limited, leaving banks across the country scrambling to interpret the law for themselves.
Further, some banks and media outlets are inducing panic by falsely indicating that if borrowers do not apply for these loans immediately, the $349 billion will be gone. Both President Trump and Treasury Secretary Steven Mnuchin have publicly stated they will ask Congress for additional money for this program if necessary.
It is our goal to make you aware of the most up-to-date information. Guidance from the U.S. Treasury and SBA is gradually being released to both banks and borrowers, with a high likelihood that additional guidance will be issued this week.
We want to ensure that your dental practice receives the maximum loan available. While we wait, the most important thing our clients can do is begin to prepare for the application process.
Selecting Your SBA Lender
If you have a current banking relationship (deposit or loan account) with Live Oak Bank, Bank of America or T Bank, we recommend applying for this loan through them. We are certain their application and underwriting process will allow you to maximize your loan and receive the funds at a time of your choosing.
For those without a current banking relationship with one of these lenders, you will likely be required to work with your local bank on your PPP loan application. In this case, we recommend you forward this communication to your local SBA lender to help ensure that you are applying for the maximum amount possible and your choice of start date of your 8-week forgiveness period.
New and Important Updates to the PPP Loan Program:
- It is now possible to get your PPP loan approval from the SBA and have your banker pull your authorization through the SBA E-Tran system, both securing your funds but delaying the receipt of the proceeds until your office is closer to reopening. We have verified through our banking contacts that the SBA has confirmed the 8-week forgiveness period begins on the date the proceeds are received by your business. This extra flexibility is so important. Delaying the receipt of your proceeds and the start of your 8-week period offers both peace of mind that the funds will not run out and the flexibility to use the money when you need it most; when you are open for business again.
- The SBA is requiring that affiliated entities need to apply for separate PPP loans. For example, if you are operating under the standard CWA partnership structure with ownership through your individual corporation, each corporation and the partnership will need a separate PPP loan application.
With this new information in mind, your action plan is to continue to gather the necessary information to support your PPP application. If you start this process now, you will be ready and prepared to act and submit your application as soon as enhanced guidance is finally issued.
Action Plan – Information to Gather
- 2019 IRS Form 941s. Most banks are requesting all of your 2019 IRS Form 941s (quarterly payroll tax returns.) Most banks are using Line 2 for total wages. However, this line excludes employee 401(k) salary deferrals and any other pre-tax benefits such as the employee portion of health insurance premiums paid. Therefore, if using Line 2, you will need to add employee 401(k) deferrals and other pre-tax benefits to Line 2 in order to have an accurate gross employee salary amount. These amounts can be found on your year-to-date employee earnings report. We encourage to you use the employee earnings report with your lender in lieu of IRS Form 941.
- Limit salary, as applicable, to $100,000 per employee. This information can also be found on your year-to-date employee earnings report.
- Employer provided health insurance. You should obtain and match your health insurance invoices to the same period as your payroll costs. These invoices will show the total amount paid for health insurance. You will need to subtract from the total the amount your employees withheld from their payroll. This can also be found on the year-to-date payroll earnings report.
- Employer provided retirement. You should obtain your 2019 pension administration. If this is not available, you should obtain a year-to-date statement from your custodian and add all employer contributions only. Do not include employee deferrals.
The information outlined in this post is updated, accurate and corroborated as of April 5, 2020. We expect additional guidance will be issued by the SBA or U.S. Treasury this coming week. For those who will be applying with a local bank, we expect your local bank will not update their processes or application procedures until this enhanced guidance is obtained.
However, by giving you this valuable information now, there is more time for preparation and readiness when it is time to submit your PPP application. We will continue to update you with any changes that may come in the coming days or weeks. Bookmark our COVID-19 Resources page to stay up to date.