While this blog assumes you have kept up to date with the PPP,  you may not be totally knowledgeable.  Here are three quick reads to get you up to speed.  The CARES Act and PPP.   What’s Forgiveness.  How to Ensure You’re Forgiven.

The Senate has approved HR 7010, a useful (and probably necessary) update to the Paycheck Protection Program loans that have undergone two tranches of funding.  At the first time of passage, no one really understood how long businesses would be forced to close.  So, the 8 week period where the funding had to be used- with 75% for payroll (and attendant expenses), with the rest for mortgage interest/rent and utilities, turned out to be way too short.

As a matter of fact, now that the rules have changed, we strongly recommend the accommodation industry- restaurants, hotels, and the like- get on board to receive a PPP loan.  Why?   Read about the changes.

• Covered Period

While the initial period was stipulated to be eight (8) weeks, which meant restaurants- which, if lucky, might get a chance to open up in late April or May (here in the DC metropolitan area, June was more on target)- would have to pay folks without having any change of serving customers.

Now, the rules stipulate that we have a 24 week period from the receipt of funds or 31 December 2020, whichever date is sooner.  The same maximum ($100,000 annual pay rate) applies- but now, [please note that the verbiage is as clear as mud on this supposition] it may mean that the loan can be for $ 46153 in compensation- which, when employed under the 8 week rule, that limit was $ 15384.  A big difference. But, even if it is just for 8 week’s of pay, it still it a big boost to those firms that have been shut down and lost their cash reserves.

• Minimum Payroll Requirements for Forgiveness

The non-payroll cap is no longer 25%, but has been upped to 40%.

BUT!

Before, if we didn’t achieve 75% of loan proceeds for payroll, there was a sliding scale for forgiveness.  (In other words, if only 70% of the proceeds went for payroll, then the forgiveness factor would have been 93% [70%/75%].)  Now, the rules are different.  If we don’t spend 60% of the loan proceeds on payroll, NOTHING is forgiven.

• Longer Period to Have Folks Back on Payroll

Before, if we lowered our pay rates for folks or we couldn’t staff up to the requisite FTE [full-time equivalent] of our base period, we’d lose loan forgiveness.  (Unless an employee REFUSED to return to work, which meant we had to send a written offer of employment at the previous pay and terms- and if they stayed on unemployment, we turned them in.)

Now, as long as SOMETIME by 31 December 2020  or the 24 week period (whichever is earlier) we achieve the previous FTE equivalent and pay rates, our loan can still be forgiven.

• What If I am Kept Closed for the Rest of 2020? Or Severely Limited in Operations?

We must still document that we couldn’t open – which means OSHA [Occupational Safety and Health Administration], CDC (Centers for Disease Control),  or HHS (Health and Human Services) guidelines issued from 21 March through 31 December 2020 so preclude us- then we can still be forgiven.  That’s a big issue for restaurants that may run into just this sort of problem.

• Tax Credit for Employer Payroll is NOW Permitted!

Prior to this modification, the laws stipulated that when we accepted a PPP loan, we could not avail ourselves of another provision of the CARES Act.  What provision?  An available two year loan for the employer portion of employment taxes (Social Security, but not the Medicare portion, a total of  6.2% of payroll) that arise from payroll issued between 27 March and 31 December 2020.  (This was called the Employee Retention Credit.)

We can pay back these funds within two years using this (non-negotiable) schedule:  50% of the deferred taxes are to be paid no later than 31 December 2021 and the other 50% by 31 December 2022.   There is NO interest due for this forbearance.

The new changes let us use this clause even if we receive a PPP loan.

• 8 Week Covered Period

This provision states that if we received our PPP loan already, we can still elect to use the 8 week period from the receipt of funds to compute our 60% (no longer 75%) payroll levels and to submit the forgiveness application to be forgiven for the total amount of the loan.

• Request for Forgiveness Extended

The original regulations stipulated that we had to request forgiveness within 6 months of loan receipt.  Now, the loan forgiveness request can be made within 10 months of the last covered period- with interest and principal payments (and fees) are deferred during that period.

Now- why haven’t you applied for a PPP loan?

(Note:  We have had tremendous success in obtaining these PPP and EIDL loans for our clients.  We’d love to help you, too!)