New rules have been released around the Paycheck Protection Program. This can give your business 100% federally guaranteed loans, much of which, may be forgiven. BayIQ will continue to provide dealers with the most up-to-date information possible to help weather the current circumstances. All of the information below is everything we know at the time this blog was published. Please keep in mind that we are NOT experts and suggest you rely on your bank, legal and accounting teams, and lenders for the best information and guidance.
Overview
This is new legislation and information is changing rapidly. We encourage you to use the available resources to stay up-to-date. Additionally, you should consult with your legal team, accounting resources, bank and lender. These loans are 100% guaranteed by the federal government and a majority is forgivable. Dealers should take advantage of this, even if you feel you don't need it.
Are you Eligible?
You're eligible if you meet the following criteria:
- In business February 15, 2020
- Businesses including non-profits, veterans organizations, tribal concerns, sole proprieterships, self-employed individuals, and independent contractors
- Fewer than 500 employees
- Business has been, or might be, impacted by COVID-19
What You're Eligible For
Up to 2.5 times your average monthly payroll
- For the 12 months preceding the date of the loan
- Not to exceed $10 million
Payroll includes:
- Salary, wages, commissions or similar compensation up to an annualized amount of $100k
- Cash tips or equivalent
- Vacation, paternal, family, medical or sick leave
- Allowance for dismissal or separation
- Group healthcare benefits plan, including insurance premiums
- Retirement benefits (401k)
- State or local taxes paid on employee compensations
Calculate Your Loan Potential
Most payroll companies have provided reports to access this information quickly and easily. We suggest you contact your payroll processor to get the most accurate numbers. If you do NOT have a payroll processor or need to pull this report yourself, here is how you can do so:
- Include: salary, commissions, bonuses, severance, 401k, and health insurance benefits
- Do NOT include taxes or any amounts paid to an individual over $100k
- Divide your total by 12 to get the monthly average
- Multiple that number by 2.5
Check out the resources below for calculators you can use!
Loan Forgiveness
One of the main benefits of the SBA Paycheck Protection Program is that the majority of the loan may be forgiven if used for specific purposes:
- Payroll costs
- Interest on mortgage obligations
- Rent and utilities
The following may cause a reduction in forgiveness:
- Using less than 75% of the loan for payroll
- If you lay-off employees
- Reducing employee compensation by 25%
Loan Terms & Conditions
Here is everything we know today about the terms and conditions of the loan:
- Interest rate: 0.5%
- Maturity: 2 years
- First payment deferred 6 months
- 100% guaranteed by SBA
- No collateral
- No personal guarantees
- No borrower or lender fees payable to SBA
What You Can Do Now
While information, policies, and procedures are rapidly changing, there are a few things you can do to ensure you're ready to submit your application when the time comes:
- Calculate your average monthly payroll and SAVE THE REPORT(S)
- Fill out the borrower Paycheck Protection Program application - this may be updated
- Contact your bank to see if they're participating
- If not, ask for a recommendation or use the SBA Find a Lender Link
Documents You May Need
While we are unsure what all will be required for your application at this time, the documents below may be requested during the process:
- Business plan and statement regarding use of funds
- Financial statements
- Ownership and affiliation list
- Business license
- Income tax returns
- Resumes of principals
Resources
If you have questions, our team is happy to help in any way we can. Please contact us or write us an email at support@bayiq.com.