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Business Seeking Guidance on PPPL Forgiveness Steps on Guidance & Preparation After Receiving Loan

5 PPP Loan Application Frustrations and How to Navigate Them

Paycheck Protection Program Creating Frustration for Many Employers

Things are HOT and HEAVY with the PPP Loan that thousands of businesses have now received. Both frustrations on how the loan is set up to work and how to track and report the loan forgiveness are mounting.

Employers would like to see some relaxing of the 75% that must go toward payroll.  Under the current requirements, only 25% of the loan forgiveness can go towards, mortgage, rent, and utilities. Business owners would like to be able to expand that 25%. According to Neil Bradley U.S. Chamber of Commerce, he states in the last week's article, “PPP Loan Rules Could soon Get an Overhaul” this is what Congress is considering doing.

Bradley also stated: “Some business owners have complained that it's difficult to bring back employees they've laid off given the generous unemployment benefits included in the Cares Act. The legislation grants laid-off employees $600 per week in addition to their local unemployment benefits, which together in some cases can exceed their regular wages. That perk is currently set to expire at the end of July.

Many employers, who are had to close their retail, restaurant, or other service business and told to stay close or only do limited services like take out, had no choice but to let their employees go. The challenge is that the loan does not deal with the real challenge of the expenses the business owner has to deal with when it comes to rent (lease of space) and other expenses that do not stop when the business is closed. The 25% does not cut it. 

Congress is also considering Another aspect of the new bill being discussed is safe harbor laws. If they were to be enacted, as long as a business makes a good faith effort to adhere to safety guidelines, customers, employees, and vendors couldn't sue to claim they became sick there.


Delayed Guidance from Federal Government But Steps to Take to Prepare for Forgiveness

Thousands of businesses have taken the Payroll Protection loans and are finally on a path to have their loans forgiven but delays in guidance by the federal government are a ways out to being final. 

Last week, the U.S. Treasury and Small Business Administration released an 11-page loan forgiveness application with instructions on how to complete it. While the document clarifies a number of items, such as when, exactly, does the eight-week covered period begin, it fails to address several key issues. Those include whether bonuses can count as cash compensation, and how quickly forgiveness will work.

Some good news is, there's no need to rush to apply for forgiveness, according to some small-business loan advisers "You won't be able to apply for forgiveness for at least 56 days after you received your PPP Loan disbursement.”

Here are four ways the application provides more clarity for business owners with PPP loans. 

1. Shows a more flexible view of the eight-week covered period

The eight-week, or 56-day, covered period begins as soon as the loan funds reach a borrower's account. But in practice that doesn't always make sense--particularly for businesses whose pay periods may not correspond to that loan disbursement date. The forgiveness application allows some wiggle room. For "administrative convenience," the SBA says borrowers can now elect an "alternative payroll covered period," which would be timed with the first day of the next pay period following their PPP loan disbursement date.

For example, the SBA notes that if a business owner received her PPP loan proceeds on Monday, April 20, and the first day of her company's next pay period begins Monday, April 27, that constitutes the first day of the alternative payroll. Note that the alternative payroll covered period does not apply to non-payroll costs.

2. Affirms that costs incurred--but not paid--during the covered period count toward forgiveness

Businesses don't have to adjust their normal bill-paying and payroll processes to conform with PPP. For business owners who pay rent on the first of the month, but don't get their PPP disbursement until mid-month, this next point should be reassuring. The forgiveness loan application says eligible, non-payroll costs must be paid during the eight-week covered period or incurred during that time and paid on or before the next regular billing date, even if the billing date is after the covered period. Similarly, eligible payroll costs incurred but not paid during the eight-week period are covered if paid on or before the next regular payroll date.

3. Clarifies the timing of when a PPP loan must be spent

Prior to the application's release, it wasn't clear if a business owner had to spend the full amount of her PPP loan within the eight-week covered period to receive any forgiveness. Indeed, strict interpretations held that loan forgiveness depended on a business owner's ability to spend 75 percent of a loan's proceeds on payroll costs within the eight-week covered period.

That's not the case. Instead, the application confirms that any amount spent during the covered period on allowable expenses, like payroll costs or rent, may be forgiven. But not all of a loan's proceeds must be exhausted during the eight-week period. "There's still a significant incentive to have the money spent over the eight weeks" to get a loan forgiven, says Chuck Morton, partner and co-chair of the corporate group at Venable, a Washington, D.C.-based law firm. "What this says now is that at least it's not all or nothing."

4. Confirms the level of reduced loan forgiveness for noncompliance

If a company's headcount or payroll costs don't match pre-crisis levels, the amount of forgiveness will fall in most cases. Prior to the current application's release, however, accounting firms were merely guessing about how much forgiveness would be reduced if a business failed to meet those two requirements. The actual calculation is based on a number of factors such as employee headcount, if lower than pre-crisis levels, and employee pay, if wages drop by more than 25 percent for workers who earned $100,000 or less in 2019.

There are discussions on penalties but it is not a 5-minute explanation. There's a complicated worksheet for calculating forgiveness, but at least now their level of forgiveness might look like in their own unique situations.

Here is where you can get the calculator compliments of -

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