If you are going through the whole process of completing your application, or have already done so, we feel your pain. You are not alone. The first thing to understand is don’t panic. Even as we speak, the government realizes the importance of this program and will make more money available. The second thing to realize is that the banks are overwhelmed and have not really received much in the way of guidance from the SBA. As a result every bank is basically different in how they are administering the program and also what their document underwriting requests are. At this point we have dealt with most of the major banks and can guide you through the process if needed.

Also a number of banks and payroll companies do not understand the definition of payroll costs, which is the base for calculating the amount of the loan you are able to apply for. It is hardly surprising given the fact that the SBA has changed its criteria three times. As a result the SBA  issued another release this morning. Following are some clarifying points:

1. Question:  Does the $100,000 cap apply only to gross compensation paid or does the $100,000 cap apply to gross compensation and to all employee benefits.

Answer: The latest guidance confirms that the $100,000 cap applies only to the cash compensation paid to its employees and does not apply to non-cash benefits paid, which includes:
a. Employer contribution to Defined Benefit or Defined Contribution Retirement Plans;
b.  Payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums; and
c.  Payment of state and local taxes assessed on compensation of employees. (Not Withholding)

2. Accounting for Federal Income taxes imposed or withheld such as Employees Federal Income tax and FICA tax (Employer & Employee):
a. The latest guidance issued on this topic clarifies that “Payroll Costs” for the purpose of calculating the Loan amount are calculated on “Gross Basis” without regard to (i.e. neither adding to or subtracting from) Federal taxes imposed or withheld, such as the employee’s and employer’s share of Federal Insurance Contributions Act (FICA) and income taxes required to be withheld from the employees.

3. Payments to independent contractors have been confirmed that they are excluded from the calculation of the Payroll Costs.

If you have already filed an application do not do so again. Hopefully if your application was not technically correct you will either have a chance to change or the loan will go through with what you have. If you have not yet started and need guidance please let us know. Also be prepared to provide additional documentation such as prior period tax returns as well as W-3, W-2 and other payroll returns.

Please contact us if you need to.

Stay healthy
Partners and Staff LHF