webinar - debt forgiveness - 4.16.20...apr 16, 2020 · determining debt forgiveness. • scenario...

Postlethwaite & Netterville, APAC April 16, 2020

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a s s u r a n c e - c o n s u l t i n g - t a x - t e c h n o l o g y - p n c p a . c o m

Postlethwaite & Netterville, A Professional Accounting Corporation

Debt ForgivenessBenjamin Vance, CPA, ABV – Consulting DirectorBrandon Lagarde, CPA, JD – Tax Director

April 16, 2020

Presenters

[email protected]

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[email protected]


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Disclaimer

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Agenda


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Morning News

Morning News


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Morning News

SBA: States and Territories approved through 4/13

Morning News


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Morning News

SBA: Approved Loans through 4/13

• Roughly 2/3 of loans have been approved to Construction, professional, manufacturing, healthcare, food and accommodation, and retail

• Lower amounts for mining (oil and gas) and agriculture

Overview


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Overview

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Overview

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Payroll Costs

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Non-Payroll Costs

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Payroll Costs for SP, IC and SE

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Partners in Partnership

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Reduction of Amount Forgiven

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Workforce Reduction

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Workforce Reduction

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Reduction of Amount Forgiven

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Salary Reduction

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Salary Reduction

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Request Debt Forgiveness

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Debt Forgiveness Potential?

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Debt Forgiveness Potential?

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Example Calculations

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Wrong: Debt forgiveness applied to eligible costs NOT PPP loan amount


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Example Calculations

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• PAYROLL costs are the anchor for determining debt forgiveness.

• Scenario E and I have full debt forgiveness because payroll costs and/or combination of non‐payroll costs were equal to or greater than the PPP loan amount.

• Scenario D has low debt forgiveness amount, as the re‐hire date was in week 8.

• Scenarios C, G, and H waited to re‐hire until weeks 2, 4, and 6.

• Scenario F had no workforce reduction, but collective reduction in payroll costs.

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100,000

200,000

300,000

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500,000

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900,000

1,000,000

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Range of Debt Forgiveness Amounts

Flow Chart

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Rudimentary example (may not include all nuances)

1.25x factor is cap for allowable and eligible non‐payroll costs


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Frequently Asked Questions


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Administration and Process


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Administration Process

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Each payroll run: Track gross wages and other eligible payroll costs (similar to loan amount)

As incurred, track eligible non‐payroll costs

Combine eligible costs for total debt forgiveness potential

Calculate debt forgiveness (workforce reduction and salary adjustment calculations)

Submit debt forgiveness package (60 days to approve)

Retain necessary supporting documents

Be prepared to submit quickly (6 month payment deferral and 60 days for lender to approve


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Track eligible payroll costs:

Calculate payroll costs similar to PPP loan amount


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Combine eligible costs for debt forgiveness

Calculate debt forgiveness

Supporting Documentation

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Cash Flow Management

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• Track cash flow before, during, and after 8‐week period• Identify future needs• Adjust and plan accordingly


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Revenue and Expense Management

• Offer creative revenue promotions

• Provide multiple payment options

• Minimize variable costs

• Evaluate labor costs

• Convert fixed costs to variable costs (sale‐lease back, contract labor, equipment leasing, etc.)

• Audit or review invoices and billings carefully

Manage the Cash Conversion Cycle

• Provide incentives to accelerate collections

• Send invoices promptly

• Revisit past‐due accounts

• Request deposits or retainers

• Negotiate vendor terms

• Request more services from vendors

• Consider more timely inventory purchases

• Improve forecasting accuracy


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Capital Expenditures

• Defer capital expenditures where practical

• Sell or lease non‐essential assets

• Evaluate options to lease vs. purchase

• Obtain multiple bids on large projects

• Carefully evaluate and manage capital projects

Debt Capital

• Evaluate flexible financing options

• Close and frequent communication with lenders

• Consider alternative capital sources, such as private equity or insurance vehicles that can provide sources of capital

• Improve financial reporting and transparency with lenders (no surprises)


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Lagniappe Topics

Lagniappe Topics

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Content and Resources

P&N Resource Center

https://www.pncpa.com/resources/coronavirus/

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Area Resources Area Resources

EconomicRelief for Businesses

• CARES Act: Paycheck Protection Program• Debt Forgiveness Under PPP• EIDL and PPP Matrix• PPP FAQ, Interim Guidance, Fact Sheets• EIDL • Internal Controls for Tracking Authorized Costs• Main Street Loan Facilities • Louisiana Loan Portfolio Guaranty Program• FFCRA• Grants• Retirement

Accounting and Assurance

• FASB• Compensating Public Entity Employees • Impairment Testing

Tax Updates • Tax Payment and Filings Updates• State and Local Tax Filing Updates

Governmental Entities • Financial Impacts and Initial Actions

Crisis Resources • Cash Flow Management• Emergency Preparedness• Working Remotely• Collaboration


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U.S. Small Business Administration

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A Professional Accounting Corporation

webinar - debt forgiveness - 4.16.20...apr 16, 2020 · determining debt forgiveness. • scenario...

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