Watch Hunt’s latest video on PPP Updates, EIDL, and forgiveness info
The 8-week period for the PPP loans has been extended to 24 weeks. However, if you have already received your loan before this bill is signed into law, you may choose to keep the 8-week period. If you’re already on track to meet the 60% you can file for forgiveness after your 8-week period is over. If you extended to the 24-week period, we encourage you to hold off on applying for forgiveness. There are still changes being made and some bankers are not even accepting application for loans less than $150k. This is due to the anticipation of an even simpler EZ form set to come out.
You should be using the tracker and know where you are. We have updated the tracker on our homepage. If you are following the 24-week period, you should be able to use only payroll expenses which will pretty much guarantee 100% forgiveness. And you won’t have to worry about some of the changes being made that are making it especially tough to navigate which other expenses will end up qualifying.
If you’re already on track to meet the 60% you can file for forgiveness after your 8-week period is over. This will get the debt off your books and help if you need additional financing for whatever reason down the road. But, if you need more time to spend it then take the full 24 weeks.
No. It doesn’t increase the loan amount, it’s just to give you more time to spend what you did receive.
At first the treasury said no, but now the IRS is saying that while the forgiveness itself is not taxable, you are not allowed to use those deductions on your income taxes. So, yes they are saying it is going to be taxable income to you. But if you think about it, it’s no different than if you increased your sales by that amount. That would be a good thing and you’d have to pay taxes on that too. There are a couple senators fighting to make this not taxable, so this could still change. Make sure this is on your and your accountant’s radar now. We don’t know what will change between now and next tax season. We do tax planning with our shops all throughout Q3 and Q4 to see where we stand and if we are on track.
If you don’t end up spending all the money, that is not necessarily a bad thing. If you have some left over, you have 2 choices: you can give it back to the bank or you can keep it in savings and pay it back over 18 months at 1% interest. We don’t know what will happen down the road – If things shut down again, there may not be any government help. It would be nice to have that money in the bank if that happens. Cash is still king. Doesn’t matter how much profit you had before this, what matters now is how much cash you have. It’s pretty cheap money to set aside that can bring peace of mind. If you have a large cash reserve, you can pay it back if you want. Of course, debt free is always good, but at a time like this we need cash in our accounts. If we give it back, we will likely never see that money again even if we need it down the road. If there is another shutdown, I personally don’t think there will be more money to help small businesses.
You need to be keeping good records. The PPP Forgiveness application is pretty in depth of what they want as far as record keeping. Keep all payroll reports on a weekly basis, keep a copy of cancelled checks for rent and bill statements for utilities. Make sure you keep up with all that documentation along the way – it will make it easier come forgiveness application time.
It’s a good idea to have the separate account to easier track expenses. Keep it open for reporting purposes until you know for sure it won’t be used any more.
Yes. With the new Interim Final Rules, a borrower may submit a loan forgiveness application any time after all the money has been used. However, we are encouraging all our clients to wait. Banks are still figuring out what they need to assist small businesses with applying for forgiveness. Some bankers are not even accepting applications for PPP loans under $150k in anticipation of another even easier EZ form. You have 10 months from the end of your Covered Period to submit the application for forgiveness.
Take a look at the forgiveness application that is out there right now. (You can download from our homepage.) That will give you a good idea on record keeping. You will need payroll reports, possibly payroll tax returns. For utilities and rent, need cancelled checks or associated bills that go along with it. Same with retirement and health insurance. Anything that substantiates how you spent the money.
Not sure yet. They haven’t come out with an updated forgiveness application yet for the 24 week period.
If you were only taking a draw in 2019, then no. They have switched the rules now and owners of S-corps, C-corps, LLCs, can only take what they made in an average 8-week period last year. This is the same rule for sole proprietors and partnerships; nothing has changed for those.
You can no longer increase your own salary as an owner, but you can look into hiring a spouse, or if one works but doesn’t take a paycheck maybe it’s time to bring them onto payroll. Increase minimums or guarantees for flat rate technicians.
Yes, as long as it does not put you over 2019 compensation.
If you don’t spend at least 60% on payroll, you may still qualify for partial loan forgiveness. However, since you now have triple the amount of time to use the money, and the minimum that has to be spent on payroll was reduced by 15%, you should be fine.
That is fine. You have to use at least 60%.
Yes, it is now a loan you are repaying so you can essentially do with it as you wish.
Yes, but only what the employer pays, not what an employee pays. Same for health care premiums.
Yes, you are able to use them as employees for all intents and purposes.
No, independent contractors should have applied separately for the PPP loan. If you did include them on application, I’d look at getting them added to payroll.
Yes, if you have the PPP money then you need to pay all your employees. As long as that 3rd employee comes back before December 31st, you are good to go. It will be looked at as if you had all 3 employees for the entire period.
Yes, and a lot of people chose to do that because it made it easier for tracking. Payroll goes by pay date, not by pay period. So if I’m paying on a pay date within the 8-week or 24-week period, it’s good. Even if it was accrued before or after.
I would not go out of my way and waste time on doing that – you don’t have a legal obligation to do so. But if the unemployment office calls to verify the terms of that employee’s dismissal, answer that honestly. That you offered the job back and they refused.
This can be handled the same as an employee on unemployment refusing to come back. Unfortunately, being afraid of getting sick is not an eligible expense, so make sure you have a written offer and declination from that employee to show that you did everything in your power to being this person back on to payroll.
There is no designation on how an employee is paid. They are looking at what you are paying this person in total. Even though you applied for the monthly average of 2019, for the forgiveness, they will be looking at what you paid them for Jan-March of this year. The max allowed is $15,384 for 8-weeks, or $46,153 for the 24-weeks total.
Yes, this is allowed. However, total paid to any employees cannot exceed the $15,385 cap in the 8-week period, or $46,153 cap in the 24-week period. And you can only use the PPP funds to bonus the owners if they were on payroll in 2019, and they cannot exceed the average 24-week pay from 2019.
The $100k cap is just for payroll. Benefits are over and above that. So if you pay $20,000 in benefits per year for an employee and they make $100k, $120k is the allowable expense over a yearly basis. It’s not hard capped at $100k, that’s just for wages.
It means you have 17 because FTE stands for Full-Time Equivalents.
Yes, it doesn’t have to be the same people, just the same amount of people.
If you’re going to use the PPP funds, you have to go by the PPP rule which is the 75%. If you’re using the FMLA funds, then you have to go by the FMLA rules which is the 2/3, and that does not count towards the PPP. If you’re not going to use the FMLA credit, then you have to go through the PPP rulings.
Yes, as long as the total paid in those 24 weeks does not go over the $15,385 mark.
That is $100,000 per year divided by 52, and then multiplied by 8 for the 8-week period, which gives us the $15,385 cap. For 24-week period, you would multiply the weekly amount by 24 to get $46,153.
Depending on the state it could be, but Federal is not going to be.
The match for most shops is going to be whatever you accrue over the 24-week period. If you have a match that is still owed from say 1st quarter, this a gray area as to whether you can deduct this expense. Without guidance to say that you can’t do it, it is worth a shot.
Yes, even though you didn’t calculate it right on the application, the rules are the same on the forgiveness side.
Yes, your banker can help you request an increase.
I don’t see you being penalized; the loan just won’t be forgiven. So if you chose to take the PPP loan, you’ll have a pretty big portion to pay back. Worst case-scenario they tell you that you have to give it back. Best case scenario they tell you it is now a loan and you have 5 years to pay it back at 1% interest.
Utilities include electric, water, sewer, telephone, internet, gas, transportation, security. There is a lot of gray area within utilities so reach out if you still have questions.
Yes, as long as (1) the amount of loan forgiveness requested for rent or lease payments to a related party is no more than the amount of mortgage interest owed on the property during the Covered Period that is attributable to the space being rented by the business, and (2) the lease and the mortgage were entered into prior to February 15, 2020. Any ownership in common between the business and the property owner is a related party for these purposes. The borrower must provide its lender with mortgage interest documentation to substantiate these payments. While rent or lease payments to a related party may be eligible for forgiveness, mortgage interest payments to a related party are not eligible for forgiveness. PPP loans are intended to help businesses cover certain non-payroll obligations that are owed to third parties, not payments to a business’s owner that occur because of how the business is structured. This will maintain equitable treatment between a business owner that holds property in a separate entity and one that holds the property in the same entity as its business operations.
Gas counts as an allowable expense but the other expenses are kind of a gray area. If you don’t have tow trucks, it probably won’t mean much to you.
I don’t see why not. It shouldn’t make any difference if it was for shop vehicles or employee vehicles.
That could be eligible.
Yes, you can payback rent, but you cannot pre-pay rent.
Common area maintenance is not an allowable deduction. Property taxes are also not likely to be allowed for a rent deduction.
The amnesty re-hire date has been extended to December 31st. So, as long as you have the same amount of employees on December 31, 2020 that you did pre-Covid, on February 15, 2020, you are good to go. They don’t have to be the same employees, or even in the same positions, so long as they are employed by you. If you could not find qualified replacements to hire, or could not restore business to previous levels of activity due to federal health guidance issued regarding social distancing and/or maintaining standards of proper sanitization, then you will still be able to qualify for full forgiveness. This still seems to be a gray area and we are hoping to receive more guidance on this.
We don’t even know when exactly the banks still start accepting the forgiveness applications, or when they will put a due date on it. Take this time to make sure you have everything tracked and in line for forgiveness. We should hopefully get some updates soon.
No. On the forgiveness application, it states the reference period is, at the Borrower’s election, either February 15, 2019 – June 30, 2019, or January 1, 2020 – February 29, 2020.
It does not effect your PPP. You just don’t want to use it for the same expenses for the PPP forgiveness.
Depending on why you were denied (unable to verify something or low credit score, etc), you could get your accountant to send in a letter on your behalf. It is worth a try.
Yes, however, it is not clear on the forgiveness application. It asks how much you got and what the application number was, but it doesn’t say it will be subtracted so we will have to wait and see for sure.
If you have more specific questions, please reach out to the professionals you work with. Every business is a little different. If you find you are not getting the support and answers that you need, please reach out to us at firstname.lastname@example.org.
What We Know
When applying for the PPP, there was not a lot of guidance about who to count for employees. By looking at the forgiveness application, the SBA is not making you go off what you originally applied for, they are allowing you to recalculate your beginning and ending FTE.
You can count all employees whether they make over or under 100k per year. You just can’t pay them more than $15,385 during the 8-week period (doesn’t matter how much per week, as long as it doesn’t exceed the $15,385 across the whole 8-week period.)
They are allowing small businesses to choose an Optional Alternative Payroll Covered Period if it better coincides with your regular pay period to ensure you will have 4 pay periods during the 8 weeks.
If you offered a job back to someone who was previously laid off, but they declined because they are making more money on unemployment, or for any other reason, make sure you have a copy of the written job offer and declination. Then you will not be penalized for that person, even though your FTE decreased, because you did everything in your power to get them back.
What We Know
Before, they were giving out up to $500,000 dollars. Not many of our shops got that but a handful did. They have now lowered the amount down to a max of $150,000. This is a true loan. It is not a grant, and it will not be forgiven. But it is a very cheap loan. 30 years at 3.75% interest with no payments due for a year. SBA wants you to use this money on current operating expenses to maintain the business.
They don’t want you paying down or refinancing old debt with it, they want it used for ongoing operations. If you receive this, be very clear about what you need to use it on. If, however you did run up a credit card bill since the shutdown that was used for operational expenses, then this money can be used to pay down that debt. But if you have outstanding debt from more than a couple months ago, you can’t use this money for that.
Even with those stipulations, this is still a pretty good deal. Having that cash in your account is a good safety net, but it also depends if it is worth it to you to pay the interest every month. There are no prepayment penalties either.
You should be receiving interest statements for the EIDL even though you are not required to start repaying yet. We encourage you to make the interest payments now if you can. Simply divide 3.75% by 12 to get your monthly payment.