An Overview of the PPP Loan Forgiveness Application Prepared as of - PowerPoint PPT Presentation

An Overview of the PPP Loan Forgiveness Application Prepared as of June 24, 2020

2 Please Note: The information contained in this presentation has been prepared for IFDA Members and the broader foodservice distribution industry. It is not intended to, and does not, provide tax, legal or professional advice concerning any specific matter. You should not act on the information without first obtaining professional advice and counsel. 2 Experience | Knowledge | Relationships | Insight

3 Obtaining Liquidity in Uncertain Times 3 Experience | Knowledge | Relationships | Insight

4 Agenda  Introductions  Paycheck Protection Program Flexibility Act  Key Terms  Forms  Payroll Costs  Non-Payroll Costs  Forgiveness Reduction Calculations  Safeharbor provisions  Document  Questions 4 Experience | Knowledge | Relationships | Insight

5 Keiter Advisors Team Carroll Hurst Matt Austin Bill Beattie Alec Kendall Scott Zickefoose Director Managing Director Managing Director Associate Senior Manager T: (804) 273-6204 T: (804) 433-4184 T: (804) 565-6018 T: (804) 433-4185 T: (804) 273-6253 churst@keiteradvisors.com maustin@keiteradvisors.com bbeattie@keiteradvisors.com akendall@keiteradvisors.com szickefoose@keitercpa.com Closed 40 foodservice transactions and advised over 120+ other distributors. 5 Experience | Knowledge | Relationships | Insight

6 PPP FLEXIBILITY ACT  Amendment of Covered Period  Loans originated prior to June 5 th can still use 8 week covered period or opt for 24 week  Extension of Safe Harbor for FTEE and Salary/Wage tests  Rehire exemption  New exemption – Inability to return to same level of business activity exemption due to compliance requirements issued by HHS, CDC or OSHA from March 1, 2020 – December 31, 2020  Payroll costs / non-payroll costs = 60%/40%  Extension of deferral time period for principal & interest – upon forgiveness determination as long as submitted within 10 months of the end of forgiveness covered period  Loan maturity = 2 vs. 5 years 6 Experience | Knowledge | Relationships | Insight

7 KEY TERMS  Covered Period – 8 week/56 day or 24 week/168 day period of a borrowers PPP Loan beginning on the Loan Disbursement date. Note, for loans originated after June 5, 2020, you may only select 24 weeks.  Alternative Payroll Covered Period – For those with every 2 weeks or weekly payroll, can use to calculate eligible payroll costs using the 8 week/56 day or 24 week/168 day period that begins on the 1 st day of their 1 st pay period following their Loan Disbursement Date. Note, for loans originated after June 5, 2020, you may only select 24 weeks. 7 Experience | Knowledge | Relationships | Insight

8 LOAN FORGIVENESS FORMS  Loan Forgiveness Application – Choose one of the following:  Form 3508EZ (Used in any of the following situations)  Can be self-employed, indep contractor or sole proprietor with no employees  Borrower did not:  Reduce salary or hourly wages of any employee by more than 25% during the Covered Period or the Alternative Payroll Covered period compared to Q1 2020  Reduce # of employees or avg paid hours of employees between 1/1/20 and the end of the Covered Period  Borrower:  Did not reduce salary or hourly wages of any employee by more than 25% during the Covered Period or the Alternative Payroll Covered period compared to Q1 2020  Was unable to operate during the Covered Period at the same level of business activity as before February 15, 2020, due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by HHS, CDC, or OSHA, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19. This can include direct and/or indirect impact of the guidance, per recent IFR.  Form 3508 (Used by all others that do not fit criteria above for 3508EZ) 8 Experience | Knowledge | Relationships | Insight

9 LOAN FORGIVENESS FORMS  Standard 3508 Loan Forgiveness Application is comprised of:  PPP 3508 Loan Forgiveness Instructions  PPP Loan Forgiveness Calculation Form inclusive of PPP Loan Forgiveness Borrower Representations and Certifications (must be submitted)  PPP Schedule A (must be submitted)  PPP Schedule A Worksheet (must be maintained but not required to be submitted) 9 Experience | Knowledge | Relationships | Insight

10 LOAN FORGIVENESS FORMS PPP Loan Forgiveness Application Representations and Certifications & Calculation Form 10 Experience | Knowledge | Relationships | Insight

11 LOAN FORGIVENESS FORMS PPP Schedule A PPP Schedule A Worksheet 11 Experience | Knowledge | Relationships | Insight

12 PAYROLL COSTS  Eligible Payroll Costs  Payroll costs paid and payroll costs incurred during 8 or 24 week Covered or Alternative Covered Period (count payroll costs that were both paid and incurred only once).  Incurred = day that employee’s pay is earned  Paid = Day that paychecks are distributed or day that Borrower originates ACH credit transaction  Payroll costs incurred but not paid during the Borrowers last pay period of the Covered Period (or Alternative Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date  For each individual employee, total amount of cash compensation eligible for forgiveness can not exceed an annual salary of $100,000, prorated for the covered period 12 Experience | Knowledge | Relationships | Insight

13 PAYROLL COSTS Incurred Paid Only count once in determining Payroll Costs 13 Experience | Knowledge | Relationships | Insight

14 PAYROLL COSTS  Only payroll costs are subject to Covered vs. Alternative Covered Period  Remember to include amounts paid for:  Health Insurance (employer portion)  Retirement plan contributions (employer portion)  State/local taxes assess on employee compensation 14 Experience | Knowledge | Relationships | Insight

15 PAYROLL COSTS: Owner-employees  Owner-employees, self employed individuals or general partners:  Amount is capped at the LESSER of $15,385 / $20,833 for each individual OR the 8 / 24 week equivalent of their 2019 compensation.  Unsure at this time if attribution rules apply  This equation is INCLUSIVE of health care costs and retirement benefits. Total costs (compensation, health insurance, and retirement contributions) are subject to limits above. 15 Experience | Knowledge | Relationships | Insight

16 NON-PAYROLL COSTS  Eligible Non-Payroll Costs  Covered mortgage obligations – Interest payments (no prepayments or principal payments) on real or personal property as long as the debt was in place prior to 2/15/20  Covered rent obligations – Business rent/lease payments pursuant to real or personal property in force before 2/15/20  Covered utility payments  Eligible Non-Payroll Costs Must be:  Paid during Covered Period or  Incurred during Covered Period AND paid on or before the next regular billing date, even if the billing date is after the Covered Period. 16 Experience | Knowledge | Relationships | Insight

17 TOTAL ELIGIBLE COSTS  Loan forgiveness is subject to several tests  Salary / hourly wage reduction test (1 st )  FTEE reduction test (2 nd )  New safeharbor guidance provided 17 Experience | Knowledge | Relationships | Insight

18 SALARY / HOURLY WAGE REDUCTION  Only employees that meet all of the following criteria are considered in this analysis:  Principal place of residence in the United States  Employed at any point during the Covered Period or the Alternative Payroll Covered Period  Received compensation from the borrower at an annualized rate of less than or equal to $100,000 for all pay periods in 2019 OR was not employed by the Borrower at any point in 2019.  **Does not include owner-employees, partners, self-employed individuals 18 Experience | Knowledge | Relationships | Insight

19 SALARY / HOURLY WAGE REDUCTION  Comparison period for Salary Wage Forgiveness is 1/1/20 – 3/31/20.  Uses concept of average annual salary and average hourly wage for both measurement periods (1/1/20 – 3/31/20 and the Covered/Alternative Payroll Covered Period)  Threshold measure is a decrease that exceeds 25%  Salary: Annual Average Salary is less in 1/1/20-3/31/20 measurement period.  Hourly: Takes the amount that the hourly wage is lower (assuming by 25% or greater), multiplies by the average number of hours worked PER WEEK in 1/1/20- 3/31/20 and then multiplies this by 8 weeks or 24 weeks**  Safe Harbor: Restore average salary/wage by the earlier of December 31 st or the date the loan forgiveness app is submitted to the level it was as of 2/15/20  The resulting reduction to forgiveness is a dollar for dollar reduction from the amount spent on allowable uses 19 Experience | Knowledge | Relationships | Insight