Rainey Law P.C.



Rainey Law P.C. is here to provide legal services for your small business.  Please email contact@raineylawpc.com or call (949) 842-5278

What is PPP?

The Coronavirus Aid, Relief, and Economic Security Act ("CARES" or "The Act") has a product know as the Paycheck Protection Program (“PPP”) intended to provide economic relief to small businesses nationwide adversely impacted by the Coronavirus Disease 2019 ("COVID-19") between February 15, 2020 and June 30, 2020. PPP authorizes up to $349 billion in loans to small business and other eligible entities by providing 8 weeks of cash-flow assistance through a 100 percent federally guaranteed loan. This program has retroactive effects to February 15, 2020, in order to help bring workers who may have already been laid off back onto companies’ payrolls. This guidance is based upon a preliminary review of the Act as we are awaiting further clarification and guidance from the IRS and the SBA.

What are key aspects of the PPP? 

  • No personal guaranty for the loan
  • No security nor collateral requirement
  • No fees, points or other costs to apply
  • Non-recourse loan (must utilize loan for approved purposes)
  • Intended to assist in retaining employees and compensation levels and to cover payroll costs, most mortgage interest, rent, and utility costs.  
  • Loan is designed to cover these expenses for 8 weeks after the loan is funded.
  • Loan may be forgiven (not have to be paid back becoming a grant of tax free money) under certain circumstances.
  • Interest is capped at 1%  (although the Act clearly sets a maximum interest amount of 4%. See Section 1102(a)(2) (L) which provides “INTEREST RATE REQUIREMENTS.—A covered loan shall bear an interest rate not to exceed 4 percent.”)

When can I apply for the PPP?

  • Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
  • Starting April 10, 2020, independent contractors and set-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through editing SBA Lenders. 
  • Applications may be submitted through June 30, 2020, or until funds made available for this purpose are exhausted. 

Mailing Address: 16870 West Bernardo Drive, Suite 400, San Diego, CA 92127
Main Office: 945 4th Avenue  San Diego, CA. 92101   Phone: 949-842-5278     Email: contact@raineylawpc.com

Can I apply for the PPP Loan and a SBA disaster assistance loan?
Yes, however, you cannot apply for an SBA disaster loan for the same purpose as the PPP. The SBA disaster assistance loan also permits you to request a $10,000 emergency grant, interest-free as part of that process. If you are interested in applying for a disaster assistance loan  you can do so with the SBA directly.

Who qualifies for the PPP? 
In addition to S and C corporations, LLCs and partnerships, all small businesses, including sole proprietorships and independent contractors can qualify for a PPP loan. As can be expected, the documentation requirements for each of those different types of businesses will differ depending on how each is organized and operated.

How much can I borrow?
The maximum amount you can borrow is calculated bases upon your average monthly payroll cost for the past year which includes expenses like salaries and wages, health insurance premiums, retirement benefits, and state and local taxes on wages. According to the recently published guidelines from the Department of Treasury, you may not include any sums you have paid to independent contractors (e.g. those workers whose pay you report on a 1099). That average payroll cost is then multiplied by 2.5 to get the maximum loan amount with a cap of $10 million.

If your business did not exist before June 30, 2019, then you may use these types of costs incurred in January 2020 and February 2020 to calculate the maximum loan amount for which you may apply.

How to have the loan forgiven?
If approached correctly, the entire loan amount may be forgiven which essentially makes the loan a grant of tax-free money. As part of the application process, you must agree that the funds will be used to to cover payroll costs, and most mortgage interest, rent , and utility costs over the 8 week period after the loan is made; and employee and compensation levels are maintained. Please note: if you utilize the loan for other purposes then the loan will not be forgiven.  You should be prepared to apply for loan forgiveness after you have used the loan proceeds for approved purposes during the 8 week period following the loan.  Click here for more information.

The maximum amount of forgiveness will be capped at the total loan principal amount.  In other words, any unpaid interest on the loan will not be included in the forgiveness calculation.  The SBA is currently reporting that they may require that 75% of the loan proceeds be used for payroll expenses in order to have the loan forgiven. We can expect the SBA to craft rules that further restrict or place requirements on this program, including future changes to how much of the loan must be applied to payroll costs and/or employee retention.  For more details, you can download a copy of the Department of Treasury’s Interim Final Rule on the program that it promulgated on April 2, 2020 here.

Where to apply? 
The SBA itself doesn’t lend you the money, they just guarantee the loan that the lender provides. You can apply for the PPP loan through any SBA-approved lender.  Visit www.sba.gov for a list of SBA lenders.