PPP & EIDL Updates



·     On April 8, the U.S. Treasury published updated FAQs on the Paycheck Protection Program (PPP). Notable guidance includes:

·     Timing: The lender must make the first disbursement of the loan no later than ten calendar days from the date of loan approval. The eight-week period begins on the date of the first disbursement.

·     Payments to independent contractors: Payments to an independent contractor or sole proprietor should not be included in the business’s payroll costs.

·     Time period to use to calculate average payroll costs: In general, either the previous 12 months or calendar year 2019 (seasonal businesses and newly opened businesses have alternatives).

·     PEOs and similar Payroll Providers: If you use a PEO or similar payroll provider, you may include the payroll paid by the third-party provider and attach supporting documentation showing the amount of wages and payroll taxes paid. The employees of the eligible borrower will not be considered employees of the payroll provider or PEO.

·     Salary Cap of $100,000: The cap is on the salary, not additional non-cash benefits such as health insurance, state and local taxes, and retirement contributions.


·     Owner Draws - To include, or not to include? Lenders are taking different approaches to including owner draws in the payroll cost calculation. SBA and Treasury guidance is ambiguous. Our advice? Talk to your lender. If you have owner draws that can be supported by bank statements, and you have paid self-employment tax on these draws, you may be able to include them under payroll costs.


·     Sole Proprietors, Eligible Self-Employed, & Independent Contractors: Applications are scheduled to open for Sole Proprietors, Eligible Self-Employed, & Independent Contractors on Friday, April 10th. Lenders are waiting on guidance from the SBA & Treasury; applications are likely to be delayed until they get that guidance. However, we know that lenders will look to the following to document 2019 earnings:

·     2019 Form 1040, Schedule C, Line 31 OR

·     2019 Form 1040 Schedule 1, Line 3 OR

·     2019 Forms 1099-MISC, Box 7. 




·     EIDL (up to) $10,000 Advance (News from the Field): To date, no Alabama SBDC clients that we know of have received the advance from the EIDL program. We have heard from other SBDCs that the calculation of the advance may be based on number of employees ($1,000 per employee, up to $10,000).


·     If you applied for the EIDL before they were offering the advance (March 29), you must reapply through https://covid19relief.sba.gov/#/. If you applied through this link and did not check the box that you wanted the "up to $10,000" advance and have since decided that you do, you should go back and apply again.


·     Loan Amount Calculations: Per the SBA SOP for Disaster Loan Programs, the SBA utilizes two methods to calculate the loan amount. In the Phase I method, the loan officer will use a simple calculation: (Annual Sales - Annual COGS) ÷ 12 × 4. Phase I eligibility cannot exceed $300,000. If it does, or if the Applicant needs more than $300,000, the Loan Officer will move on to Phase II. Phase II includes adjustments to the economic injury calculation based on a balance sheet analysis and identification of extraordinary items, frozen receivables, frozen inventory, and accelerated debt. 

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