PPP Update and Forgiveness Guidance

It seems like forever ago that the second round of funding for the PPP and EIDL were signed into law, but in reality it was only 2 weeks ago.  Since that time, the SBA and Department of Treasury has continued to release new FAQ and Guidelines.

Some of the recent changes include:

  • Companies have until May 18th to pay back PPP loans that they received but may not need.
    • If companies received less than $2 million in PPP Funds, there is a safe harbor that states, “will be deemed to have made the required certification concerning the necessity of the loan
      request in good faith.”
    • If they do, they can qualify for the Employee Retention Credit.
  • PPP Forgiveness rules continue to be updated including:
    • You have to pay employees at least 75% of their earnings of the 1st quarter.
    • PPP funds that have been used and forgiven are not included in your expenses for 2020.
    • If you make an offer (written and in good faith) to bring back someone at the same pay and hours, but they refuse due to Covid-19 fears or unemployment benefits, they will not count against your forgiveness.
  • PPP Forgiveness for Self-Employed, Independent, and Contract Workers
    • Forgiveness is for “Owner Compensation Replacement”, which is figured by taking your 2019 Net Profit on your Schedule C and multiplying it by 8/52 (or 0.154)
    • That will get you close to 75%, the other 25% can be utilized for mortgage interest, rent, or utilities.
      • If you have a home office, you can utilize the Home Office Deduction formula to figure out your eligible expenses.
      • If you do not have any other eligible expenses, you can either pay back the remainder or use it as a 1% loan (with a 2-year term) to help mitigate future losses.
  • The PPP breakdowns for the second round have included more small loans.
    • 91% of loans in the second round have been $150,000 and under (compared with 74% in the first round)
      • 73% of all loans have been $50,000 and under
    • Average loan size is $73,000 (down from $206,000)

Now comes the even more difficult part.  You have to be diligent in documenting the offers for your workers to come back to work, where your PPP loans go, and more.

Also, a note about those that took the PPP loans and may not need them.  When the Paycheck Protection Program came out, it was the height of uncertainty.  Many businesses were looking at declining trends in revenues and were afraid (and rightly so) that there was no end in sight.  They also might have been worried about the possibility of laying off or furloughing several workers, which this program was intended to prevent.  Remember your feelings in late March, early April, and how crazy everything was.  Now, in Indiana, we have a bit more clarity of the steps the economy will take to open up, even though customer behavior is still a guess.  So, with this in mind, when the names come out of everyone who received PPP or EIDL funds, let us try to take that into account.

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  1. […] Check and double check your math and information, so that you can certify that everything on your application is right, and that you are using them for the correct purposes.  We all remember the hullabaloo that ensued with the last PPP certification.    […]

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