PAYCHECK PROTECTION PROGRAM/CARES ACT
The Paycheck Protection Program.
Paycheck Protection Program is a loan program that a business, which has experienced business concern as a result of COVID–19, can use to keep its employees paid and employed. This loan program enables businesses to cover the following eligible expenses:
- Payroll costs, meaning the sum of payments of any compensation with respect to employees that are 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 for any retirement benefit; or payment of State or local tax assessed on the compensation of employees. 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.
- Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
- Employee salaries, commissions, or similar compensations;
- Payments of interest mortgage payments (which shall not include any prepayment of or payment of principal on a mortgage obligation);
- Rent (including rent under a lease agreement)
- Utilities; and
- Interest on any other debt obligations that were incurred before February 15, 2020.
The funding is in the form of a covered loan, ONLY with the option to become a forgivable loan if the employer follows the payroll continuity.
A covered loan is a loan made during the period beginning on February 15, 2020 and ending on June 30, 2020.
Four eligible types of businesses which are covered in this act are:
- A small business, nonprofit 501(c)(3) organization, veteran's organization, or Tribal business which employs:
- not more than 500 employees;
- if applicable, the size standard in number of employees established by the Small Business Administration for the industry in which the business concern, nonprofit organization, veteran's organization, or tribal business concern operates.
- Sole proprietorship, or independent contractor and eligible self-employed individuals;
- business with more than one physical location but meeting certain given conditions;
- business operating under affiliated rules e.g. a business operating as a franchise.
The amount of a covered loan is the lesser of:
- the product obtained by multiplying the average total monthly payments by the applicant for payroll costs incurred during the one-year period before the date on which the loan is made, except that, in the case of an applicant that is seasonal employer, as determined by the administrator, the average total monthly payments for payroll shall be for the 12-week period beginning February 15, 2019, or at the election of the eligible recipient, March 1, 2019 and ending June 30, 2019 by 2.5; or
- if requested by an otherwise eligible recipient that was not in business during the period beginning on Feb. 15, 2019 and ending on June 30, 2019, the product obtained by multiplying the average total monthly payments by the applicant for payroll costs incurred during the period beginning on Jan. 1, 2020 and ending on Feb. 29, 2020 by 2.5; or
- (ii) $10,000,000. maximum per business.
A covered loan is a fee-free loan and has an interest rate not exceeding four percent.
The covered period is March 1, 2020 through Dec. 31, 2020.
A loan is eligible for forgiveness in the amount equal to the cost of maintaining payroll continuity during the period of March 1, 2020 through December 31, 2020.
Payroll costs do not include:
- the compensation of an individual employee in excess of $33,333 during the covered period;
- qualified sick leave wages and qualified family leave wages in which a credit is allowed under the H.R. 6201 - Families First Coronavirus Response Act.
The amount of loan forgiveness under this section shall not exceed the principal amount of the financing made available under the applicable covered loan. The amount of loan forgiveness shall not exceed the sum of:
- The total payroll costs incurred by the eligible recipient during the covered period; and
- The amount of payments made during the covered period on debt obligations that were incurred before the covered period.
- The covered period is March 1, 2020 through December 31, 2020
- The amount of loan forgiveness is reduced if the businesses full-time equivalent (FTE) count has a reduction in FTE.
An eligible recipient shall be eligible for forgiveness of indebtedness on a covered loan in an amount equal to the sum of the following costs incurred and payments made during the covered period:
- Payroll costs;
- Any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation);
- Any payment on any covered rent obligation;
- Any covered utility payment.
An eligible recipient applying for a covered loan shall make a good faith certification:
1) That the uncertainty of current economic condition makes necessary the loan request to support the ongoing operations of the eligible recipient;
2) Acknowledging that funds will be used to retain workers and maintain payroll or mortgage payments, lease payments, and utility payments;
3) That the eligible recipient does not have an application pending for a loan for the same purpose and duplicative of amounts applied for or received under a covered loan; and
4) During the period beginning on February 15, 2020 and ending on December 31, 2020, that the eligible recipient has not received amounts for the same purpose and duplicative of amounts applied for or received under a covered loan.
During the covered period, the requirement that a small business concern is unable to obtain credit elsewhere, as defined in the CARES Act, shall not apply to a covered loan. During the covered period, with respect to a covered loan, no personal guarantee and no collateral shall be required for the covered loan.
With respect to a covered loan that has a remaining balance after reduction based on the loan forgiveness amount under section 1106 of the CARES Act:
1) The remaining balance shall continue to be guaranteed by the SBA; and
2) The covered loan shall have a maximum maturity of 10 years from the date on which the borrower applies for loan forgiveness.
Yes. Complete payment deferment relief for a period of not less than 6 months, including payment of principal, interest, and fees, and not more than 1 year.
For information on State Programs, visit North Dakota COVID-19 Financial Resources.
Yes. For more information, visit North Dakota COVID-19 Financial Resources.
The authority to make loans is extended to additional lenders as determined by the Small Business Administration. For State Funding contact North Dakota Development Fund. For Federal Funding, contact your local banker.
The term covered period means the 8-week period beginning on the date of the origination of a covered loan.
- Under the CARES Act, the portion of a PPP loan that is eligible for forgiveness will be proportionally reduced by the amount of (i) any reductions in full-time equivalent employees during the covered period as compared to the average number of full-time equivalent employees per month during certain historical periods prior to the COVID-19 pandemic and (ii) certain reductions in salary or wages during the covered period. However, borrowers have an opportunity to cure those reductions by rehiring employees who were terminated between February 15, 2020 and April 26, 2020 and by restoring salaries or wages for employees whose pay was reduced during that period by June 30, 2020.
- The PPP Flexibility Act provides that forgiveness will not be reduced for employee headcount reductions between February 15, 2020 and December 31, 2020 if the borrower is able to document that either: (i) it is unable to rehire individuals who were employees on February 15, 2020 and is unable to hire similarly qualified employees for unfilled positions by December 31, 2020, or (ii) it is unable to return to the same level of business that was conducted prior to February 15, 2020 as a result of guidance from the Secretary of Health and Human Services, the Director of the Center for Disease Control and Prevention or the Occupational Safety and Health Administration relating to COVID-19 safety (including as a result of complying with standards for sanitation, social distancing and other worker or customer safety requirements). In addition, the period to cure reductions in headcount, salary and wages is extended from June 30, 2020 to December 31, 2020.
The amount of loan forgiveness shall be reduced by the amount of any reduction in total salary or wages of any employee during the covered period that is in excess of 25 percent of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period. An employee described here, is any employee who did not receive, during any single pay period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000.
Tipped Workers – an eligible recipient with tipped employees may receive forgiveness for additional wages paid to those employees.
The circumstances related to the amount of loan forgiveness shall be determined without regard to a reduction in the number of FTE employees of an eligible recipient or a reduction in the salary of 1 or more employees of the eligible employer, as applicable, during the period beginning on February 15, 2020 and ending on the date that is 30 days after the date of enactment of this Act.
In a circumstance described below, the loan forgiveness shall be determined:
- In which
- During the period beginning on February 15, 2020 and ending on the date that is 30 days after the date of enactment of this Act, there is a reduction, as compared to February 15, 2020, in the number of FTE employees of an eligible recipient; and
- Not later than June 30, 2020, the eligible employer has eliminated the reduction in the number of FTE employees;
- In which
- During the period beginning on February 15, 2020 and ending on the date that is 30 days after the date of enactment of this Act, there is a reduction, as compared to February 15, 2020, in the salary or wages of 1 or more employees of the eligible recipient; and
- Not later June 30, 2020, the eligible employer has eliminated the reduction in the salary or wages of such employees; or
- In which the events described above occur.
Yes, and the following are the limitations on a paycheck protection covered loan:
An eligible recipient of a covered loan for purposes of paying payroll costs and other obligations described in question two (Q2) shall not be eligible to receive an Economic Injury Disaster Loan (EIDL) for the same purpose.