PPP Loan Forgiveness – You got $$, now what?

April 18, 2020 - 3 minutes read

So, you were one of those lucky businesses that received a payment from your now favorite banker, now how do you get PPP loan forgiveness? By the way, congratulations!! After your celebration, you’ll need to start thinking about what you need to do to be sure those funds are forgiven rather than a loan. Seriously, what’s better than free money? Now the trick is to make sure that happens!

The problem is that the US Treasury and SBA have been so focused on creating the forms and issuing last minute qualifying application guidelines that they haven’t thought through, in detail, what’s required and the process to magically turn all those loans into free money. Oh sure, you know that you have to spend it on payroll, rent, mortgage interest or utilities. But, what does that mean to you, exactly?

  • During the application process everyone learned that “payroll costs” mean more than just salaries and wages or it can mean less than salaries and wages. So, maybe you have that one figured out, but what about self-employed? And what about defined benefit plan contributions? And what does that mean for payroll costs earned in the week prior to receiving the funds since, they weren’t technically “incurred” during the 8 week disbursement period – do they count?
  • For many hospitality workers they’ll be better off financially to apply for unemployment rather than return to work. If you’ve furloughed your team, how do you get them back?
  • And if your business is shuttered or nearly so, does it make sense to hire them back now rather than when the “shelter in place” order has been lifted? What happens if they don’t come back during the 8 week period so that your number of total FTE employees has dropped? How do you measure FTE at the beginning of the period and again during the 8 weeks to be sure your business has remained at “full employment”?
  • What about rent, does it apply to just real estate or does it include personal property? Can I prepay 6 months?
  • Forgiveness is not guaranteed.  Who decides whether your loan should be forgiven or not? What criteria, timing and evidence do they need?

When you applied, it all seemed so simple, just spend the money on payroll, rent, and utilities.

Without PPP loan forgiveness guidance each institution will be left to interpret the sketchy existing rules that likely won’t be consistent from bank to bank.

Every business will have differing circumstances and every company’s road to forgiveness needs to be carefully considered. Your company has been lucky enough to successfully get a loan. Now you need an action plan, probably a cash flow plan and a solid tracking method to be relatively sure that you’ll qualify for forgiveness. Preferably, before the 8 week clock starts ticking.

If you have questions, please contact our office.

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