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On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was signed into law. Included in the CARES Act is the Paycheck Protection Program. The goal of this Act is to provide support for small and medium-sized businesses as a result of the impact of COVID-19. Below, we will break down some of the components of the Act based on the analysis done by the Mulligan Funding team.
Information is still coming through, so we encourage you to check back for additional information on how to apply. If you have questions that are not answered below, please use our chatbot in the lower right-hand corner of your browser to enter those into our system and we will work to update this list accordingly.
I heard the SBA has already run out of funds for the PPP. Does this mean my business won’t get the funding it needs to support the impact of COVID – 19?
While it seems that the $350B has been approved by the SBA, our understanding is that only a small portion of that amount has actually been distributed to businesses. Many lenders rushed to get approval before they were able to find a way to secure the capital needed to disburse the funds. As such, there will be a portion of the funding that will lose its approval and be put back into distribution.
Additionally, since only about 2 million of the 30 million eligible businesses nationwide have received approvals from the $350B allocation, Congress is working to approve additional funding as part of the PPP program. There seems to be bipartisan support for making a large amount of additional funds available to the program, and we hope to have an update on this soon.
Where do I apply for a loan through the CARES Act and Payment Protection Program?
For questions about applying for the PPP, please contact us at programadvisory@mulliganfunding.com.
What Loan Product is offered by the Paycheck Protection Program?
The Paycheck Protection Program provides small businesses with funds to pay up to 8 weeks of payroll costs, including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. Funds are provided in the form of loans that will be fully forgiven when used for payroll costs (at least 75% of the funds are expected to be used for payroll costs), interest on mortgages, rent, and utilities. Loan payments will be deferred for six months and no collateral or personal guarantees are required. There are no upfront fees for this loan.
Who is eligible to apply for funding under the CARES Act and Payment Protection Program?
Businesses that employ no more than 500 employees, including private non-profit organizations and 501(c)(19) veterans organizations, may be eligible to receive a loan under the CARES Act. The business must have been in operation on February 15th, 2020 and must have had employees for whom it paid salaries and payroll taxes at that time.
I already have a loan with Mulligan Funding. Will that affect my eligibility to apply for a loan through the PPP?
No. Your existing Mulligan loan in no way impacts your PPP application or the amount of funds for which you may qualify.
How much can I borrow?
The goal of the CARES Act and Paycheck Protection Program is to support businesses over a period of 8 weeks. As such, there is a limit to how much a business can borrow under the Act. The maximum amount allowed under the CARES Act is your average total monthly “payroll costs” for the 12 months prior to the loan (it is okay to use full year 2019 as the basis for your numbers as well) multiplied by 2.5 (up to a maximum of $10m). Below is the calculation:
Step 1: Calculate your Payroll Costs (can only include US-based employees). For more information on how to calculate your Payroll Costs, please click here.
Step 2: Subtract any compensation paid to any employees in excess of an annual salary of $100,000 (applies only to cash compensation, not to non-cash benefits).
Step 3: Calculate the Average Monthly Payroll Costs by dividing the amount in Step 2 by 12.
Step 4: Multiply the Average Monthly Payroll Costs by 2.5. This equals the total Loan Amount.
What are the terms of the Paycheck Protection Program loan
If over the 8 week period immediately following receipt of the loan under the CARES Act and Payment Protection Program, the business can demonstrate that the funds were used for “payroll costs” (at least 75% should be used on payroll costs) rent, interest payments on debt, and utilities, they can seek full loan forgiveness. Forgiveness will be reduced if full-time headcount declines by more than 25%, or if salaries and wages decrease by more than 25%.
For the portion of any loans that are not forgiven, interest rates will be 1% APR, with no payments due for the first 6 months, and a loan term of 2 years.
I’ve already applied for the Disaster Relief / EIDL loans through the SBA website. Is that the same as this program?
No. The EIDL loans, or any disaster loans that you applied for on the SBA Website, are entirely different from the loans offered through the Paycheck Protection Program (PPP) that was established by the CARES Act. If you received an EIDL loan and/or EIDL COVID-19 “advance” between January 31, 2020 and April 3, 2020, you are still eligible to apply to the PPP. Please note on your application the sum of any applicable EIDL loan minus EIDL COVID-19 Advance. If you applied for an EIDL loan but have not heard back, just go ahead and proceed with the PPP loan. ISBA determined that they do not have capacity to process and fund these PPP loans directly, therefore, SBA is not accepting any applications for the PPP loans on their website.
What are the details of the loan forgiveness calculation?
The primary purpose of PPP loans is to help businesses retain their existing staff. Businesses who use the funds for the permissible purposes below and retain approximately 75% or more of their staff, may be eligible for a 100% forgiveness 8 weeks after obtaining the loan. The funds can be used for expenses such as:
- Payroll costs, including benefits (At least 75% of the forgiven amount must have been used for payroll costs).
- Interest on debt secured by real or personal property*
- Rent*
- Utilities (which includes phone and internet access)*
*The contract, note, or agreement must have commenced prior to February 15, 2020.
For an overview of how to calculate your potential forgiveness amount, the Chamber of Commerce has produced this helpful guide.
What counts as “Payroll costs”?
Payroll costs defined under the CARES Act and Paycheck Protection Program include the following:
- Salary, wage, commission, or similar compensation
- Payment of cash tip or equivalent
- Payment for vacation, parental, family, medical, or sick leave
- Allowance for dismissal or separation
- Payment required for the provisions of group health care benefits, including insurance premiums
- Payment of any retirement benefit
- Payment of State or local tax assessed on the compensation of employees
For more details on how to calculate your Payroll Costs, click here.
What does NOT count as a Payroll cost?
The following expenses are not considered Payroll costs as defined by the CARES Act and Paycheck Protection Program:
- Compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the period February 15, to June 30, 2020
- Payroll taxes, railroad retirement taxes, and income taxes
- Any compensation of an employee whose principal place of residence is outside of the United States
- Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116–5 127); or qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act
What documents do I need to provide in order to be considered for loan forgiveness?
In order to qualify for loan forgiveness under the CARES Act and Paycheck Protection Program, you will need to provide the following documents:
- 940 tax form for 2019
- 2019 report or statement from your payroll processing company, broken out by each employee, that lists total pay, taxes, and if applicable any benefits paid. Some payroll processing companies have already developed reports specifically for the PPP loan program. Click here to learn more.
- If not already listed on the payroll processing statement/report, receipts for any employer-paid health/vision/dental and retirement benefits, if applicable
- Documentation to demonstrate the business was active and had at least one employee as of Feb 15, 2020 (such as a February payroll statement, business bank statement, etc)
- Photo of your Driver’s License
Are there any fees associated with this Loan? Will Mulligan Funding be charging a fee or additional interest?
There are absolutely no fees associated with this loan. There is also no interest due if the entire loan is forgiven (accrued interest is forgiven). For any remaining balance of any loans not forgiven, the interest rate is only 1.0% APR.
Please note: The SBA expects there to be a reasonable amount of fraud around the PPP loans. If you are solicited for a PPP loan, we encourage you to do your due diligence and be sure that the lender is a reputable and SBA approved lender. Also, if any lender requires payment up front, or if their terms do not adhere to what the SBA and U.S. Treasury have specified, suspect fraud and report the vendor here.
For more questions about the CARES Act Payment Protection Program, please contact our team at 866-395-4726.
Last updated April 7, 2020 at 9:00 am PT
The information shared is intended to be used for informational purposes only and you should independently research and verify.
Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.