PPP Forgiveness Update 6/26/2020
A lot of changes this week in the PPP Forgiveness world. I am recapping these items heading into the weekend so you can think about next steps. If you need help with your application visit: https://www.truenorthllp.com/ppp-forgiveness
RELAX Time is on your side - Most banks are saying they will not be ready to accept forgiveness applications until July 1 with many saying July 15th. Loan repayment does not start for six months after disbursement. Also, we expect further guidance from the SBA next week on some gray issues.
8 Weeks or 24 Weeks – With this week’s guidance, it doesn’t matter. You have UP TO 24 weeks to spend the PPP funds. If you are done in 9, 10, 15, etc., you call that the end date of your Covered Period. This is super good news and you don’t need to use heroic efforts to spend the money in 8 weeks nor do you have to take the risk of a lower headcount by waiting 24 weeks.
Covered Period or Alternative Covered Period – The Covered period begins the day the PPP Loan hits your bank account (Loan disbursement date). The Alternative Covered period is “The first day of the pay period immediately following your loan disbursement date”. Add up your payrolls for both and see which works out best for you. With new guidance on number 2 above, it really doesn’t matter. The end of the covered period is the date you decided to apply for forgiveness.
Nonpayroll Costs – If you consume your entire loan on payroll, you will not have to do any of the calculations or provide documentation on these costs. [See item 2 above. Maybe a good idea?]
Short Form 3508EZ or Long Form 3808 – If ANY of the following apply then you can use the short form:
Borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application
Borrower did not reduce annual salary or hourly wages of ANY employee by more than 25 percent during the Covered Period as compared to period between January 1, 2020 and March 31 AND Borrower did not reduce the number of employees or average paid hours between JANUARY 1, 2020 and the end of the covered period. [ie. your headcount on the application date is greater than or equal to your headcount on January 1, 2020; there are some exceptions where lower headcount is allowed]
Borrower did not reduce annual salary or hourly wages of ANY employee by more than 25 percent during the Covered Period as compared to period between January 1, 2020 and March 31 AND The borrower was unable to operate during the covered period at the same level of business as before February 15, 2020 due to [official restrictions or any other work or customer safety requirement related to COVID-19 * We are working to get better guidance on this part of the definition]
Here is the BIG Catch. Even if you qualify for the short form, you are still required to develop and maintain documentation supporting your certification that salaries or wages were not reduced by more than 25% for EACH employee and documentation supporting your certification that orrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the covered period. [translated – very painful]
For those that have reduced headcount or wage reductions of more than 25% you must complete the long form including Schedule A Worksheet Tables 1 and 2 and Safe Harbor Calculations [translated – very painful]
Need help. We have you covered. Visit https://www.truenorthllp.com/ppp-forgiveness