The SBA issued guidance to local banks last week that helps them understand the process and lending requirements that they will follow to issue the $349 billion in forgivable paycheck protection loans, as well as what will be required for forgiveness. If you want a quick overview of the Paycheck Protection Program, check out our article on nonprofit and church eligibility for the Paycheck Protection Program.
The program is being administered through local SBA banks, so the first step in applying is to contact your local bank and ask what their unique requirements and guidelines are. Banks are experiencing a large influx in requests this week, so most are prioritizing existing customers first. Bank of America received 185,000 applications this past weekend for more than $30 billion in loans, and Wells Fargo has already met their limit on loans and stopped taking applications. You will need to move quickly if you want to apply for the program and loan forgiveness, so check with your local bank to see if they are an SBA lender.
NOTE FOR CHURCHES: The SBA provided a Q&A for faith-based organizations that clarifies what strings, if any, are attached to faith-based organizations when they accept federal funds. There has been variance in how banks have been interpreting the law, so this should provide a more consistent understanding for who is eligible and what the stipulations are. If you were initially turned away from your bank because they say religious organizations are not eligible, we recommend checking if they have seen the Q&A above.
How To Prepare Your Application
Aplos has been working with our local bank to document the process so you know what to expect. Our local bank sent us their list of required items that you may need to collect as well when you apply for the Paycheck Protection Program. Keep in mind that your bank may not have all the same requirements.
Here is a quick breakdown:
1. SBA Paycheck Protection Program Application
The application asks you to estimate your average monthly payroll expenses for the loan amount. If you’d like help calculating this, download our free, updated Paycheck Protection calculator. We updated it with a couple of key items the SBA guidance changed or clarified that were a departure from the text of the original CARES Act description.
Download The Calculator
Important Update: Based on the updated SBA guidelines, we did not include independent contractors, since they can apply for the loan on their own. It is still unclear if you should include pastoral housing for your pastors in the costs, so check with your bank.
Other Payroll Tools: If you use our partner Gusto for payroll, they have created a report that will automatically calculate your payroll expense for the Paycheck Protection Program. Check it out on their Support Center.
2. Payroll Documentation To Verify Average Monthly Payroll Costs And Number Of Employees
Our bank requested detailed payroll information for each employee for the period from 1/1/19 to 12/31/19 to verify our average monthly payroll. If we were a seasonal business, they would have requested payroll for 2/15/19 to 6/30/19, and if our business had been new, the dates to provide would have been 1/1/20 to 2/29/20. Our documentation needed to include state and local taxes, benefits for paid and sick leave, payments for healthcare benefits, and payments for retirement benefits.
Here is the information we provided for the full year of 2019:
- Paycheck Protection Calculator – We completed the Payroll Costs tab of the Paycheck Protection Calculator above to show the detail for each employee based on our payroll system.
- 2019 Form 940 – We used this federal return as verification that the total payroll cost amount matched what was shown in the Excel document. In this form, we used box 3.
- 2019 Quarterly State Payroll Tax Returns – These verified the amount of state and local taxes paid by our business for our employees. For us, this was California’s DE-9 Quarterly Return. We also used boxes D3 and E2 in this form.
We included an area on our Paycheck Protection Calculator to note these official forms so our payroll detail totals for employees could be more easily verified.
3. Verification Business Was In Operation On 2/15/20
To verify our business was operating on 2/15/20, we included:
- A copy of our February bank statement
- A copy of our payroll detail for February pay period
4. Beneficial Ownership Form
Since our company is a business, we were asked to complete the Beneficial Ownership form. Nonprofits and churches are corporations, and not owned by individuals. This is different from a for-profit small business that may have an owner that holds equity in the business. Banks will likely vary on whether they ask you to complete this form and how they expect you to complete it, so be sure to clarify with them what is recommended and which sections will apply to you.
When you apply for the Paycheck Protection Program, there may be more items the bank will request, but these are the standard items they will likely start with to understand if you qualify, what your loan amount is, and what portion may be forgiven.
Do you do you know if the salary designated in the loan is for March and April when the employees are not working or for the two months after the employees return to work? Do they need to be working now even if the business is closed down?
Some churches do not have to file forms 940’s and 941’s because there only employee is the pastor of which federal income tax and FICA taxes are not taken out. If the bank is refusing to process application without this, is there any recourse for the church?
It is possible that the required documentation will be slightly different at another bank. Each bank may set slightly different rules on what they will accept to verify the payroll and tax payments.