helping companies navigate the paycheck protection program ... · program (ppp) loan forgiveness...

Navigating the Paycheck Protection

Program (PPP)Loan Forgiveness

Application

May 21, 20203:30pm – 5:00pm

Disclaimer: To the best of our knowledge, this information was correct at the time of this webinar on May 21, 2020 at 3:30pm. Given the fluidity of the situation, and rapidly changing guidelines, be aware that some of this information may have changed.

Navigating the Paycheck Protection Program (PPP)

Loan Forgiveness Application

KRISTINA HUDSONExecutive DirectorOneRedmond

Hosted By

Supporting Regional Partners

Business Response Team Technical Assistancehttps://re.startup425.org

https://re.startup425.org/

Past Financial Resources Webinars• SBA Loans & Grants Available Under the CARES Act• Helping Companies Navigate the Paycheck Protection Program

(PPP)• Helping Independent Contractors & Gig Workers Navigate the

the CARES Act• Strategies & Tips for Navigating Rent Relief• Survival Strategies for Small Business Owners – webinar in

Spanish• Tax Relief and Incentives Available to Businesses

www.eastsiderecoveryhub.org

http://www.eastsiderecoveryhub.org/

Small Business Paycheck Protection Program (PPP)

A $659 Billion loan program designed to provide a direct incentive for small businesses to keep their workers on the payroll.

Featured Speakers

Mark CostelloDeputy District DirectorU.S. Small Business Administration (SBA)Seattle District Office

Janie SaccoMarketing & Outreach SpecialistU.S. Small Business Administration (SBA)Seattle District Office

Steve BurkeWestern Washington Regional ManagerSmall Business Development Center (SBDC)



MARK COSTELLODeputy District Director

U.S. Small Business AdministrationSeattle District Office



STEVE BURKEWestern Washington Regional ManagerSmall Business Development Center (SBDC)

PPP Loan Forgiveness Information and Application Process

PPP Loan Forgiveness

Washington Small Business Development Center

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

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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 Form2. PPP Schedule A3. Loan Forgiveness Application Representations &

Certifications

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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

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Washington Small Business Development Center 14

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



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)

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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

• There is an unresolved timing issue. Many 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

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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, 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

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Worksheet A–Used to Complete Sched A-Payroll Detail:• Included in payroll costs are salary, wages, commission, cash tips,

vacation pay, parental, family, medical or sick leave and 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

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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

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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

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Self Employed Individuals/Sole Proprietors, Owners getting W-2 wages and Entity Partners:

• 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

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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.• For employees who make more than $100K on an annualized as shown by salary

paid January 1, 2020 to March 31st, 2020, the calculation is more complicated.• Will additional flexibility be added to choose when your 8 weeks starts?• Congress may consider changes to the 8-week time frame but as of May 20 it is

still 8-weeks.• 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.

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Washington Small Business Development Center 23

Find the Nearest Advisor:https://wsbdc.org/contact-an-advisor/

[email protected]

https://wsbdc.org/contact-an-advisor/

JANIE SACCOMarketing & Outreach Specialist

U.S. Small Business AdministrationSeattle District Office



Paycheck Protection ProgramLoan Forgiveness Application

Examples

Example 1Corporation/LLCAssumptions for ABC Inc.:1) Owner-employee earns $6,0002) Maintained 2 FTE employees after Order3) Laid off 3 FTE employees after Order4) Rehired 3 FTE after receiving the PPP Loan5) Paid $5,000 for employee health insurance during Covered Period6) Paid $3,000 for state and local taxes during Covered Period

PPP Loan Forgiveness Calculation

FormPage 3


FormPage 3

A


FormPage 3

B


FormPage 4

PPP Loan Forgiveness Application

Page 6


Page 6A


Page 6B


Page 7


Page 7A


Page 9


Page 11

Example 2Sole Proprietorship• Assumptions for John Smith dba Smith’s Technical Support:

• Owner takes a draw of $2,500 during the Covered Period• Maintained 0 FTE employees after Order• Laid off 1 FTE employee after Order• Rehired 1 FTE after receiving the PPP Loan• Paid $0 for employee health insurance during Covered Period• Paid $350 for state and local taxes during Covered Period


FormPage 3


Form Page 4


Page 6


Page 9

Questions

US Small Business Administration206.553.7310

Q & A

Mark CostelloDeputy District DirectorU.S. Small Business Administration (SBA)Seattle District Office

Janie SaccoMarketing & Outreach SpecialistU.S. Small Business Administration (SBA)Seattle District Office

Steve BurkeWestern Washington Regional ManagerSmall Business Development Center (SBDC)

Hosted By

Supporting Partners

Navigating the Paycheck Protection

Program (PPP)Loan Forgiveness

Application

May 21, 20203:30pm – 5:00pm THANK YOU

FOR PARTICIPATING