UPDATED PPP Loan Forgiveness Information

In March, Congress created an entirely new SBA product, the Paycheck Protection Program (PPP) loan.  It has been a whirlwind ever since, trying to sort out the details and keep up with frequent changes as to how this was going to work.

The dust has settled somewhat on the loan application process, but the biggest draw of the PPP loan was the potential for it to be completely forgiven if certain conditions were met.  SBA had to give immediate attention to getting the program up and running for the initial application and approval process.  They simply didn’t have the bandwidth to publish forgiveness guidelines at the same time.  As a result, much of what was publicized in the media and online as to exactly how loan forgiveness will work was, quite frankly, speculation, until official guidance came out this past weekend.  Whatever you thought you understood about it, you’ll have to re-evaluate it now.

There are really two parts to loan forgiveness.  First is the timing and type of expenses that will qualify for forgiveness.  There are definitely some ins and outs to understand and plan for the best outcome, but relatively speaking, that’s the easy part.

Where it really gets complicated is figuring changes not only in “head count” as measured by full time equivalent employees (FTEs), but also changes in the amount specific employees are paid for eight weeks following the loan.  There are numerous options as to (a) how to measure FTEs and what time period to compare them to, and (b) how to measure individual employee compensation and what time period to compare that to.

You could use 100% of your PPP loan proceeds to cover payroll and nothing else, but still get tripped up with FTEs or compensation and be on the hook to repay some part of it.  The loss of even one very part time employee could result in thousands of dollars of loan not being forgiven, out of proportion to your other employees and overall payroll.  These calculations are littered with landmines, many of which you may not see until it’s too late if you’re not paying attention in advance.  Proceed with caution, and do not assume all will be well unless you fully understand the various implications.

Even as business starts to resume, the economic fallout will be with us for quite some time.  Could you use some help to navigate loan forgiveness, cash flow, or other challenges so your business will not only survive, but thrive?  We would be happy to have a conversation to explore how we might be able to help.  Feel free to contact us to schedule a brief phone call or zoom meeting.