Brian Golias, Attorney at Law

Brian J. Golias


Posted on April 1, 2020

Dated April 1, 2020. The information in this post is subject to change upon the SBA’s issuance of guidelines regarding the Paycheck Protection Program Application.

Initial Chart

  1. Who needs to check a box in the top left corner of the first page of the application?

Answer: A box should only need to be checked if applicant is a non-profit, veteran organization, tribal organization, independent contractor, or self-employed individual.  Otherwise, do not check any box.

  1. What is the definition of an independent contractor?

Answer: Unfortunately, neither the CARES Act nor the applicable federal regulations define independent contractor. Section 1102(a)(2)(D)(ii)(II) of the CARES Act states that “an eligible…independent contractor…seeking a covered loan shall submit documentation as is necessary to establish such individual as eligible, including payroll tax filings reported to the Internal Revenue Service, Forms 1099-MISC… .”  So, if you deem your business to be the provision of services as an independent contractor, you should include Forms 1099-MISC or other supporting tax documentation with your application in order to substantiate your eligibility to apply for this loan.

  1. Which address should an applicant use as its Primary Business Address?

Answer: Metz Lewis recommends using the address also used on the applicant’s federal income tax return.

  1. Who should the Primary Contact be?

Answer: Metz Lewis suggests providing the name and e-mail address of an individual who is responsible for or knowledgeable of applicant’s finances and reads their e-mails frequently.

  1. How does an applicant determine Average Monthly Payroll?

Answer: The PPP application instructions recommend calculating the average monthly payroll for 2019. The CARES Act allows applicants to calculate the average monthly payroll costs over the last year, meaning that an applicant could calculate the average monthly payroll costs over the 12 month period ending March 31, 2020. Metz Lewis counsels that you use the instruction guidelines, which are to calculate the average monthly payroll for 2019.


  • For seasonal businesses, applicants have the option to calculate either the (a) average monthly payroll based on the time period commencing 2/15/2019 and ending 6/30/2019, with the same $100,000 compensation cap or (b) average monthly payroll based on the time period commencing 3/1/19 and ending 6/30/19, with the same $100,000 compensation cap.
  • For new businesses that were not operating in 2019, applicants can calculate average monthly payroll based on the time period commencing 1/1/20 and ending 2/29/20, with the same $100,000 compensation cap.
  1. What costs does Average Monthly Payroll include?

Answer: Payroll costs include salary, wages, commissions, tips, employee benefits (including costs for vacation, parental, family, medical or sick leave, payments required for provision of group health care benefits, including insurance premiums, and payments of any retirement benefit), and state and local taxes assessed on compensation. The aggregate of payroll costs must be capped at $100,000 on an annualized basis for each employee.  This approach is based upon the Payment Protection Program Information Sheet provided by the Treasury Department.

Answer for sole proprietor or independent contractor: Payroll costs include wages, commissions, income or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

Metz Lewis has prepared the attached Average Monthly Payroll Calculation worksheet to assist you in calculating Average Monthly Payroll.

  1. What number should applicant input for “Number of Jobs?”

Answer: You should input the number of existing full time, part time, and other employees of the applicant as of the date of application. Employees include personnel obtained from temporary employee agencies, professional employee organizations, or leasing concerns.

If you have reduced your workforce due to the COVID-19 crisis, Metz Lewis advises you to provide a supplemental response on Addendum A including the number of employees employed by you as of December 31, 2019, which coincides with the recommended payroll determination period.

  1. Which boxes should applicant check for Purpose of the loan?

Answer: Metz Lewis recommends only checking the first three boxes for payroll, rent/mortgage interest, and utilities. Checking “other” may create a basis for denial of loan forgiveness.

  1. If you rent real property from a related-party landlord, for example a landlord entity that is controlled by owners of your business, should you check the “rent/mortgage interest” box? Does checking this box create risk of slowing down the application process?

Answer: A covered rent obligation is defined by Section 1106(a)(4) of the CARES Act as rent obligated under a leasing agreement in force before 2/15/2020. The definition of rent obligation does not preclude you from using loan proceeds for payment of rent to a related-party landlord. Out of an abundance of caution and if you intend to use loan proceeds for payroll purposes only,  Metz Lewis would advise that you only checking the “payroll” box in the Purpose of the loan section.

Applicant Ownership

  1. What if there is not an owner with greater than 20% ownership stake?

Answer: Metz Lewis recommends that if no single owner owns 20% or more of your company, then you should specifically state that no individual owner owns greater than 20%. You may note that you will provide full ownership information upon request.

Metz Lewis has prepared the attached addendum A form for submitting all potential supplemental responses to the PPP loan application.

  1. What address should be used for each owner?

Answer: Metz Lewis advises you use the address used on the owner’s personal income tax return.

Question Section

  1. In regard to question 3, should affiliates be listed and described on addendum A if affiliates are exempt under the SBA 7(a) and expanded CARES Act rules? For example, if you are either assigned a NAICS code beginning with 72, an SBA-approved franchise operation, or a SBIC-financed business should you list affiliates that do not fall under these categories and would not be eligible for the Payment Protection Program?

Answer: Metz Lewis recommends that you list and describe all affiliates on addendum A, whether or not affiliates are exempt.

  1. What effect do the SBA’s rules on affiliation among your company and other related business entities have on the loan application?

Answer: The SBA uses the concept of affiliation for two purposes in connection with the PPP loan application.

  1. First, to determine if you meet the size limitation under the program.  You cannot have more than 500 employees at the time of submission. Certain businesses, such as accommodations and travel having NAICS code 72, SBA-approved franchise operations and SBIC-financed businesses, may have more than 500 employees so long as they do not have more than 500 employees at any one location.
  2. Second, to determine any interrelationships between your company and other business entities. In this context, the SBA is interested in having clear visibility into the ownership structure of your company and whether your company is commonly controlled by, or in fact controls other, related businesses. For this purpose, the SBA determines “affiliation” based on the principle of control over the businesses in question. In large part, the SBA regulations parallel the commonly understood legal concepts of “control,” including economic control (e.g., rights to participate in the economic benefits and burdens of ownership), voting control (e.g., share ownership, the direct or indirect control over the management of the enterprise through the right to appoint its directors, managers and/or officers and the right to influence other important business activities through governance mechanisms), and managerial control.

Caveat: The SBA’s regulations on what factors do or do not constitute affiliation by control are highly fact intensive. If this is applicable to you, please contact your Metz Lewis attorney to discuss factors particularly relevant to your individual circumstance.


  1. What are covered utilities?

Answer: Covered utilities are defined by Section 1106(a)(5) of the CARES Act as payment for service for distribution of electricity, gas, water, transportation, telephone or internet access for which service began before 2/15/2020. Neither the CARES Act nor the applicable federal regulations provide guidance as to what is considered “transportation” costs. Accordingly, Metz Lewis advises that an applicant provide documentation of traditional utilities, including electricity, gas, water, phone and internet.

  1. How many years of tax returns and financial statements should an applicant provide?

Answer: Metz Lewis recommends gathering tax returns and financial statements from the last 3 years.

Metz Lewis Advice: When you initial beside each certification, you certify under penalties of perjury. By certifying that the information provided is true and accurate, you are, in effect, agreeing to, and should anticipate a request to, provide additional documentation in support of all information provided on page 1 of the application. Accordingly, Metz Lewis strongly advises each applicant not to estimate or assume accuracy of any numbers or other information provided on page 1 of the application.

This post was written by Brian Golias

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