PPP loans

PPP Loans:

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program (PPP), the initiative provides 100% federally guaranteed loans to small businesses. Importantly, these PPP loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward. The first round of funding for the PPP loans ran out in 14 days.  Congress approved an additional $310 billion in funding to restore the PPP Program, and there are still funds remaining.  The deadline to apply for the loan is June 30.  

The administration’s PPP program guidelines and additional resources can be found at https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses

Loan Forgiveness Application:

The Small Business Administration released a revised Loan Forgiveness Application and an EZ version of the form in response to the Paycheck Protection Program Flexibility Act signed by the President on June 5th.  The new applications and instructions help clarify many of the rules and most self-employed people should be able to get full forgiveness of the loan.  The Flexibility Act also importantly allows the covered period to be extended to 24 weeks (instead of 8), reduces the amount needed to be spent on payroll to 60% of the costs, and loosens the rules on replacing full time equivalent employees.  We still expect additional guidance, but the new rules will make it much easier on most businesses. Links to the current draft of the new forms and instructions are below:

PPP Loan Forgiveness Application EZ Form 

PPP Loan Forgiveness EZ Form Instructions

PPP Loan Forgiveness Application Long Form

PPP Loan Forgiveness Application Long Form Instructions

Loan Tracker:

Dickey and Tremper, LLP has put together a spreadsheet to help track the usage of PPP loan funds.  Your PPP loan may be forgiven if you spend 100% of the funds on payroll, mortgage interest, rent, and utilities in the eight weeks after receiving the loan.  You must spend at least 60% on payroll costs and the other 40% can be divided up between rent, utilities, and mortgage interest.   If less than 60% is spent on payroll costs, than the forgivable amount of other costs will be reduced. Reducing your employee head count or material salary can also reduce the amount of loan forgiveness.  To maintain 100% loan forgiveness on the monies spent, you will need to either keep your payroll as it was before February 15, 2020, or hire back and undo wage reductions by December 31, 2020.  The total amount forgiven will be reduced proportional to the reduction in head count, or decreased by the total amount of reduced salary if you cut an employee’s wages by more than 25%.  The Flexibility Act provided relief for those businesses that have a loss of FTEs because of Covid-19 related restrictions that prevent the same level of business activity through the end of the year. This is a significant help to those businesses who still have not been able to fully reopen because of stay-at-home restrictions. 

PPP Loan Tracking Worksheet 

Please see the US Chamber of Commerce Coronavirus Emergency Loans Checklist for more details on the program and forgiveness

Applying for a PPP loan and navigating how and when to spend the funds can be a complicated process.  If you have questions or need help, please contact us, we are happy to help.

Rob Tremper, CPA, CVA, Partner

Mark Dickey, CPA, CVA, Partner