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Understanding the Paycheck Protection Program

The Coronavirus Aid, Relief and Economic Security (CARES) Act allocates nearly $350 billion to small businesses that have been adversely affected by the COVID-19 pandemic. One of the most important segments of this legislation is a new loan program from the Small Business Administration (SBA) called the Paycheck Protection Program (PPP).

Certified financial planner Gary Pittsford breaks down what PPP means for your home improvement store.

The Finer Points of PPP
Home improvement stores with fewer than 500 employees are eligible to receive PPP loans, which can be forgiven if borrowers meet certain conditions. PPP loans can be used to cover payroll costs, group health insurance premiums, salaries, rent, mortgage interest and utilities.

The single largest benefit of a loan issued under this program is the possibility of having all or a portion of the loan forgiven. In order for the loans to be forgiven, your business must maintain the same number of employees (or equivalents) from Feb. 15 through June 30, 2020 as it did during either the same period in 2019, or from Jan. 1, 2020 until Feb. 15, 2020. To the extent this requirement is not met by business owners, the amount eligible for forgiveness will be reduced ratably.

To calculate how much money your business can borrow, multiply your operation’s average total monthly payments for payroll by 2.5 during the period beginning Feb. 15 to March 1, 2020. That figure must be spent over the next eight weeks and at least 75 percent must be spent on meeting payroll. Operators in high-rent areas should note that only 25 percent of the total borrowed amount can be spent on rent or utilities.

Finally, repayments from loans made under PPP will be deferred for a period of not less than six months and no longer than one year.

Qualifying for Employee Retention Program

The “trigger” for a company to begin to be eligible for the employee retention credit is either that operations of the company have been fully or partially suspended during a quarter as a result of governmental authority or a quarter in which the revenue in 2020 that has less than half of the revenue from the same quarter in 2019. Remember when calculating the business income for the quarter, the stipulation refers to the gross revenue for the quarter and not profit.

CORRECTION: An earlier version of this article online and in the May print issue of Hardware Retailing did not clearly explain that the “trigger for a company to begin to be eligible for the credit …” refers to employee retention credits, a separate component of the CARES Act. Review Castle Wealth Advisors’ complete analysis of the CARES Act online.

Hardware Retailing recommends reaching out to your legal or financial advisers to understand how the CARES Act specifically impacts your business.

Gary Pittsford is president and CEO of Castle Wealth Advisors. Castle specializes in helping families and closely held business owners with valuations, succession planning, estate and income tax analysis and retirement income projections. For more information visit castle3.com or email gary@castle3.com.

About Todd Taber

Todd Taber
Todd is trends editor for Hardware Retailing magazine. He graduated from Indiana University where he majored in journalism and French. Throughout his career, he has aimed to highlight small businesses and their community value. He joined NRHA in 2017.

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