Changes to PPP Usage & Forgiveness

Our most recent webinar (hosted on June 24) featured PBO Advisory Group’s Francesca San Diego and Scott Palka providing an update on the Payroll Protection Plan loan forgiveness. (Please note – The information in this article is current as of June 16, 2020.)

Changes made to the PPP provide more flexibility for using loan funds and extend the deadline for spending those funds – which is good news for businesses that received these loans.

To date, 4.7 million loans have been made, with the average being $110,000. If your business has not yet applied or received a PPP loan, it’s not too late. There is still approximately $100 billion available in the fund though applications must be received by June 20, 2020. In California, 550,800 loans have been made, with the average being nearly $121,000.

The News is Good

The most recent changes are significant and positive:

  • The covered period has been extended from 8-weeks to 24-weeks. If you received your funds before June 5, 2020, you may elect to use the original 8-week period
  • The payroll minimum spending has been lowered from 75% to 60%
  • The repayment terms for loans made after June 5, 2020 have been extended to 5 years. For loans received before this date, the term is still 2 years, although lenders may extend this date
  • The FICA deferral is now available through December 31, 2020

There is a new form – 3508EZ – which will make the forgiveness process much easier and eliminates the need to complete a Schedule A form and worksheet. To be eligible to use this form, you must meet at least one of the following criteria:

  • Self-employed and no employees
  • Did not reduce the salaries or wages of employees by more than 25% and did not reduce the number of exempt employees or hours of non-exempt employees
  • Experienced reductions in business activity as a result of health directives related to COVID-19 and did not reduce the salaries or wages of employees by more than 25%

Applying for Forgiveness

The application deadline for forgiveness is 10 months after the end of the covered period. If you do not apply, you will not receive forgiveness. It is important to note that your bank has the sole discretion to decide what to forgive and what not to forgive.

According to Francesca and Scott, you should apply for forgiveness as soon as possible after you have spent all the loan funds. Many banks have already started building portals and creating their own forms, so you should check with your lender before you start compiling your information.

Even with the changes noted above, not all businesses will achieve 100% forgiveness. Fortunately, the interest rate for all loans is 1% (regardless of when you received your loan). If your term is 2 years, your payment is estimated at $44.58 per month, per $1,000. For a 5-year term, your estimated payment is $17.84 per month, per $1,000.

PBO Advisory Group is ready to help you with tracking and reporting your expenses. Please reach out to us if we can be of help.

Key Takeaways

Our hour-long webinar provided extensive information about the PPP, tracking your use of the funds, working toward full forgiveness and more. A full recording of the webinar is available here.

Here are the key takeaways of the webinar:

  • Document all of your allowable expenses, including the date paid and keep evidence of the payment
  • Know your lender, its interpretation of the Act and SBA guidance, and the specific tracking and reporting requirements of your loan
  • Regularly check the SBA and Treasury websites for new interpretations and requirements and watch for updates from PBO Advisory Group
  • To achieve forgiveness, you must submit a forgiveness application with written verification
  • If you do not qualify to use the EZ form (noted above), you should immediately compile the tools you need, including the spreadsheets developed by PBO Advisory Group, and start using them

The webinar also includes important information regarding:

  • Alternative covered period for payroll costs
  • Specifics on what is included in payroll costs
  • Eligible non-payroll costs
  • Full time equivalent definitions, determinations, and safe harbors
  • Forgiveness calculations
  • Owner employee issues
  • Planning consideration

PBO Advisory Group offers all the services needed to maximize your forgiveness, track and report your loan expenses, and more. Please contact us today so we can help you get the process started.