Millions of small business owners across the nation have received highly anticipated government loans from the Paycheck Protection Program (PPP). The hallmark of the program, forgiveness eligibility, is also the most crucial for businesses impacted by the financial impact of public health measures enacted to mitigate the spread of the virus. If borrowers follow certain rules, they are eligible to have the loan partially or fully forgiven.
The rules for forgiveness are not final or complete, the Small Business Administration is expected to issue final guidance by the end of April.
We are hosting a webinar tomorrow to answer your PPP questions, discuss forgiveness calculations and provide strategies and guidance to help borrowers qualify for the maximum amount of forgiveness available. We will also give a brief overview on the Main Street Lending Program based on the limited details currently available.
Register here to join us:
Some of the strategies we will discuss are also listed below.
- Create a PPP Forgiveness file to begin to compiling relevant information and documents necessary to define the parameters of your loan. This can help you project how to spend the funds over 8 weeks to maximize the amount eligible for forgiveness. Some important information and documents are below:
- Funding date – document the date the funds are deposited into your bank account. This is the start of your 8 week period to spend funds to be eligible for forgiveness
- Run payroll reports for the options available for your base period for the headcount and salary computation (2/15/2019 through 6/30/2019 OR 1/1/2020 through 2/29/2020 for non-seasonal employers)
- Reports should include hours worked by pay period
- Use these reports to determine your base period for the Full Time equivalent (FTE) restoration calculation
- FTE has not been defined. We expect it to be defined as either an average of 30 hours per week; or an average of 30 hours per week plus the part time hours in total / 120 for a month (the employee retention credit defines FTE using this method)
- Payroll tax filings and payroll reports to support any employer state unemployment tax
- Proof of expense and payment to verify payments on covered mortgage interest, lease, or utility payments
- Calculate your payroll costs – at least 75% of the loan proceeds must be used for eligible payroll costs.
- Assess your non payroll costs and project over your 8 week period how you intend to pay those expenses. Document your files to be submitted with your application for forgiveness. Eligible expenses include rent, interest on covered mortgages, and utilities. These expenses can not exceed 25% of the loan amount.
- Estimate your amount of loan forgiveness. We have prepared a sample template based on the CAREs Act and subsequently released guidance from the Small Business Administration and Department of Treasury. We will go through a sample template tomorrow during our webinar and provide a copy for participants.
- Consider the rehire rules. The CAREs Act does not reduce forgiveness eligibility for and reduction in headcount or salary that occurred between February 15, 2020 and April 26, 2020 if restored by June 30, 2020.
- We expect lenders will expect that both headcount and salary levels are restored by week 8 in order to prepare the loan forgiveness calculation with actual numbers. Additional guidance on is expected.
It is extremely important to develop and implement a system for tracking your PPP expenses as soon as possible. Our outsourced accounting department has developed a process to effectively monitor and track usage of PPP funds within your accounting system to support compliance with the program, maximize forgiveness and proactively prepare for the forgiveness application process.
Donna Stilwell, CPA, CFE is a Partner at Brinker Simpson and leads the Outsourced Accounting Group. She will discuss some of those strategies and processes during our webinar tomorrow.
We are happy to discuss any questions or comments you may have. Our team is working and available to review with you. Please contact our office at 610-544-5900 or firstname.lastname@example.org .
We are in this together,
Brinker Simpson & Company, LLC
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, & cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).