PPP Loan Forgiveness Information and Application Process
PPP Loan Forgiveness Today we’ll cover: • PPP Basic Application Information • The PPP Loan Forgiveness Application Required Docs • Documents Required to be Maintained but not Submitted • Payroll Use, Costs & Forgiveness Calculations • Impact of the EIDL Loan on the PPP • Completing The Loan Forgiveness Application • Worksheet A – Used to Complete Schedule A • FTE (Full-Time Equivalent) Calculation Criteria • Self Employed Individuals/Sole Proprietors • Representations, Certifications, Audits, Appeals 2 Washington Small Business Development Center
PPP Loan Forgiveness The information provided in this presentation is relevant as of 5-28-20. Neither the presenter not the Washington Small Business Development Centers are the final authority on this material. The information is subject to change at any time with new legislation and/or additional rules from the Treasury or the SBA. The PPP Loan Forgiveness Application Requirements: The PPP Loan Forgiveness document is 11 pages and includes numerous details and math calculations but only three documents/pages are required to be submitted: 1. Primary Application and Loan Forgiveness Calculation Form 2. PPP Schedule A 3. Loan Forgiveness Application Representations & Certifications 3 Washington Small Business Development Center
PPP Loan Forgiveness Documents Required to be Maintained but not Submitted are: 1. PPP Schedule A Worksheet with documentation of each employee including salary/wage reductions Table 1 & Table 2, documentation of rehire refusals, firings, resignations, reductions in work hours 2. All records relating to the loan including the loan application, certifications for the loan request, and the borrower's compliance with loan requirements 3. Documents must be retained for six years after loan forgiveness or the loan is paid in full and permit inspection of the documents on request 4 Washington Small Business Development Center
PPP Loan Forgiveness PPP Basic Application Information–Starting at the Top: • Business EIN, PPP Loan Number & Lender PPP Loan Number • PPP Loan Amount • PPP Loan Disbursement Date • Employees at time of application • Employees at time of request for forgiveness • Do not check the $2 Million Box unless you received a PPP for that amount or more 5 Washington Small Business Development Center
PPP Loan Forgiveness Payroll Use, Costs & Forgiveness Calculations – Schedules & Covered Period: • Describe/Select your regular Payroll Schedule to show when payroll costs are incurred (accrued) or paid (cash). Paid is the day checks or ACH transactions are originated. Incurred is the day costs are earned • Covered Period is the 8-week period following funding of the PPP. • NEW – Some costs incurred before the 8 weeks and paid during the 8 weeks and some costs incurred during the 8 weeks and paid afterwards can qualify for forgiveness • NEW - Alternate Payroll Covered Period – May allow the 8 weeks to start on the first day of the normal pay period rather than on disbursement of the funds (for payroll only) 6 Washington Small Business Development Center
PPP Loan Forgiveness Impact of the EIDL Loan on the PPP for Borrowers who receive both loans: • Economic Injury Disaster Loan (EIDL) Advance – Reduces the PPP Loan Forgiveness by the Amount of the EIDL Advance • EIDL Application Number on the PPP Application – Used to check if PPP recipient received an EIDL loan. If they did and it was used for payroll, the EIDL should have been refinanced into the PPP BUT • More guidance is needed on EIDL vs. PPP timing. More PPP Loans have been processed than EIDL loans. They cannot be used for the same purposes, but we do not know how that will be resolved for EIDL loans funded after PPP loans are funded and or the 8 week PPP loan forgiveness period is over 7 Washington Small Business Development Center
PPP Loan Forgiveness Completing The Loan Forgiveness Application: • The application requires the borrower to start with the Worksheet to Schedule A, then completion of Schedule A, then completion of the Loan Forgiveness Application Form • The Worksheet to Schedule A : 1) computes eligible compensation for each employee – including any who had their salaries reduced, 2) caps compensation at $100K, 3) determines the FTE for the Covered Period or Alternate Covered Period, 4) Uses FTE to determine any reduction in loan forgiveness • Tables 1 & 2 in the Worksheet A determine the salaries/wages paid to each employee during the 8-week period as compared to the 2019 annualized rate 8 Washington Small Business Development Center
PPP Loan Forgiveness Worksheet A–Used to Complete Sched A-Payroll Detail: • Included in payroll costs are salary, wages, commission, cash tips, vacation pay, hazard pay and parental, family, medical or sick leave & severance pay • Excluded are salaries in excess of $100K, employees outside the US, Sick or family leave under the Families First Act • Also Excluded for this worksheet are: 1) independent contractors– these are not eligible as employees, Owner employees, Self Employed & partners - these add their information directly to Schedule A • Using 75% of the PPP Loan amount on qualified payroll during the 8- week period establishes that element for full forgiveness. This is called Safe Harbor for Payroll 9 Washington Small Business Development Center
PPP Loan Forgiveness FTE (Full-Time Equivalent) Calculation Criteria: • Average FTE Calculation of the 8-week period – two methods: • 1) Add the total employee hours and divide by 40 • 2) Calculate every employee who worked 40 hours per week or more at as 1.0, Use 0.5 for all employees who worked less that 40 hours per week. Add it up to determine FTE • A similar calculation will be made to determine the historical FTE average the PPP loan was based on. The reference period are either Feb 15, 2019 to June 30, 2019 or Jan 1, 2020 to February 29, 2020 or for seasonal employers, May 1, 2019 to Sept 15, 2019 10 Washington Small Business Development Center
PPP Loan Forgiveness FTE (Full-Time Equivalent) Calculation Criteria: • If the historical FTE matches the 8-week FTE there is no reduction in the forgiveness for FTE. This is called FTE Safe Harbor • If there is not a match, the loan forgiveness is reduced accordingly. • To get full loan forgiveness, 75% of the loan amount is used for qualified payroll and 25% is used for qualified rent, utilities and mortgage interest. • NEW – If employer can show written offer to rehire an employee (during the 8-week period) but it was rejected that reduction in FTE will not result in a reduction in forgiveness • The same is true if an employee was fired for cause, voluntarily resigned, or wanted a reduction in hours 11 Washington Small Business Development Center
PPP Loan Forgiveness Self Employed Individuals/Sole Proprietors, Owners getting W-2 wages and Entity Partners – Lender Response to Loan Forgiveness Application: • Self Employed - Forgiveness is related to payroll costs at 8/52 of line 31 of the individual’s 2019 Schedule C • Amounts paid to Self Employed, Owners on W-2 wages, and General Partners are capped at $15,385 each person • Amounts paid to these individuals during the 8-week covered period or alternate covered period, are totaled and added to Line #9 of Schedule A • For ALL PPP loan forgiveness applications – The lender must respond to the borrower with a decision within 60 days 12 Washington Small Business Development Center
PPP Loan Forgiveness Representation, Certifications, Audits, Appeals: • The loan forgiveness application requires a representations and certification page with signature to be submitted – The borrower must certify that they know and understand the rules of the PPP including eligibility, use of proceeds, loan forgiveness amounts • The SBA may review PPP loans and Loan Forgiveness Applications as it deems appropriate and at any time • Lenders are required to confirm the calculations on the loan forgiveness application • PPP loan reviews will require the lender to ask the PPP borrower to respond any questions and the SBA will consider all information provided by the borrower in it review • The SBA has established rules and timelines for appeals for any PPP borrower who is determined ineligible for the PPP or loan forgiveness by either the borrower or the SBA 13 Washington Small Business Development Center
PPP Loan Forgiveness PPP Loan Forgiveness Questions & Unknowns: • It is not clear what the EIDL impact on PPP will be for EIDL loans not processed before the PPP is issued or the EIDL was not refinanced in the PPP. • Congress may consider changes to the 8-week time frame but as of May 20 it is still 8-weeks. Will additional flexibility be added to choose when your 8 weeks starts? • Date (or final date) to apply for loan forgiveness with the lender is not clear. • Definition/Limits of “Any Pay Period” for historical Cash & FTE calculation is not clear. • Payments to self employed, owners getting W-2 wages and Entity partners are included and allowed for forgiveness but Guidance on qualifying amounts is missing. 14 Washington Small Business Development Center
Find the Nearest Advisor: https://wsbdc.org/contact-an-advisor/ washington@wsbdc.org Washington Small Business Development Center 15
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