On May 15th The SBA and Treasury released the Paycheck Protection Forgiveness application along with new guidelines on what qualifies as forgivable. These clarifications simplify the process for borrowers and may allow more people to have the loan forgive. The clarifications include:

• Options for borrows to calculate the cost using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles.
  • This means that if your eight-week funding period interrupts your normal pay period, there may be some opportunities to change the calculated period.

• Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the eight-week period after receiving their PPP loan

• Much like being able to calculate the cost using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles, you may have some opportunities to change the calculated period as it relates to the eight-week funding period for eligible expenses.

• Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness

• They now have provided instructions on performing the calculations to determine how much of your loan is forgivable.

• Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30

• You must be back to 100% of the original FTE count no later than June 30^th

• Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that were declined
• If you had any employees who you had laid off, offered to rehire, and they declined this situation will now be considered during the loan forgiveness process.

The “To Long Didn’t Read”

The SBA and Treasury have released the PPP Loan Forgiveness Application along with new information around the loan. This information includes flexibility for the eight-week funding period for both payroll and eligible expenses, step by step instructions for forgiveness calculation, ability to rehire your staff with the PPP funding by June 30^th, and new consideration for businesses who offered to rehire staff but were declined.  JFS will continue to dive deeper into this update and provide more information later this week.

Remember to meet with your financial team early to ensure you have had proper reporting for your PPP funding. Do not wait until the last minute as you risk your eligibility for forgiveness.

If you were in the first rounds of the PPP Loan recipients, your eight-week period of funding is coming to a close. Whether you spent it all on keeping your staff on payroll, certain employee benefits relating to healthcare, interest on mortgage obligations, rent, utilities, or interest on any other existing debt obligations it is likely that you want the loan forgiven. Depending on how you set your books up after receiving the loan, getting the loan forgiven should be relatively easy. However, you should start thinking about reporting now otherwise you’ll be asking yourself “Is it too late now to say Sorry?” like Justin Bieber.

What qualifies as a forgivable expense?

As mentioned in previous posts the loan will be forgiven if spent on payroll costs, certain employee benefits relating to healthcare, interest on mortgage obligations, rent, utilities, or interest on any other existing debt obligations. According to SBA.Gov forgiveness of the loan is also based on “the employer maintaining or quickly rehiring employees and maintaining salary levels”. 75% of the loan must have been spent on payroll-related costs, allowing for 25% of it to be used on the other listed expenses. So, if you had to make the hard decision to lay people off your forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. If that is the case, don’t worry! Loan payments are deferred for six months with the loan having a maturity of 2 years and an interest rate of 1%. Not having it forgiven will not be the end of the world but will require some extra budgeting. If you used more than 25% of the loan on non-payroll related costs, then your maximum forgivable amount will be equal to payroll costs divided by 0.75.

Proving your Forgivable expenses

A lender will not simply take your word for it during the reporting process. You will have to prove every expense paid for by the PPP funding should be forgiven. Documentation matters, especially now. If you had set up a separate bank account for the PPP funding, then your documentation will be easy. When applying for forgiveness, you should the following:

• Clean Books– This should be obvious. When bringing your finances to a lender. It will make the whole process quicker for you and the lender as well as making them more likely to want to work with you in the future.
• Payroll Documentation– You need to bring documentation verifying the full-time employees as well as their salaries/wages for the period you used the loan to pay them. This documentation could be payroll tax filings, income/payroll/unemployment insurance filings from your state, and paperwork that verifies retirement and health insurance contributions. Get with your payroll provider early to get this documentation.
• Expense Documentation- Clean Books should make providing this easy. You must provide clear documentation showing payments of mortgage interest, rent, and utilities. This documentation could be account statements, receipts, or canceled checks.
  Remember to double-check with your lender. They may have specific requirements outside of this. Do not wait until the last minute to check with them, they may require documentation that takes longer to get.

The “to long didn’t read”

As the eight-week funding period ends, it is time to start thinking about applying for loan forgiveness. Your PPP loan qualifies for total forgiveness if you used at least 75% of it for payroll costs and at most 25% for expenses like certain employee benefits relating to healthcare, interest on mortgage obligations, rent, utilities, or interest on any other existing debt obligations.

Forgiveness of your PPP is also dependent on maintaining the same “headcount” on your payroll, meaning if you let go of any full-time staff during this time your loan may not be totally forgiven.

When applying for forgiveness you need to bring clean books, payroll documentation, expense documentation, and any other documentation your specific lender requires. Should your loan not be forgiven, loan payments are deferred for six months with the loan having a maturity of 2 years and an interest rate of 1%. If you used more than 25% of the loan on non-payroll related costs, then your maximum forgivable amount will be equal to payroll costs divided by 0.75.

If you are looking for help calculating the amount of forgiveness you will get on your loan, please contact JFS at 970-623-3752 or zshanahan@jfsconsultingco.com for access to a forgiveness calculator.