Office: 585.673.2600
Yes, you are eligible. You must, however, make a certification on the application that “Current economic uncertainty makes this loan request necessary to support ongoing operations”.
Maximum loan amounts are 2.5x average monthly payroll costs, not to exceed $10 million.
Payroll costs include the following:
Payroll costs do NOT include the following:
We recommend you check with your respective bank, but SBA guidance states you can use either the 2019 calendar year OR the past 12 trailing months.
There are 2 steps in determining the amount that can be forgiven. Step 1 is to calculate the potential forgiven amount based on costs incurred / amounts spent on eligible costs in the immediate 8-week period following the loan. Step 2 is to review headcount and salary during the 8-week period as compared to the base period to determine if there will be a reduction in the amount forgiven calculated in Step 1.
Eligible costs consist of the following:
Any mortgage or other debt obligation incurred prior to February 15, 2020. Only the interest paid is eligible for forgiveness. Repayment of principal does not qualify as an eligible cost. Based on current guidance, credit card debt does not count as eligible debt for purposes of interest paid.
The guidance is not currently clear what constitutes a rent payment. The Act states that it is “rent obligated under a lease agreement in force before February 15, 2020”. It is not clear if this includes commercial building rent only or would include equipment or other rent paid under leasing agreements.
Utilities are defined as payments for electricity, gas, water, transportation telephone and internet access for which service began before February 15, 2020.
Yes. No more than 25% of the loan forgiveness amount may be attributable to non-payroll costs, and at least 75% of the forgiveness amount must be attributable to payroll costs.
Let’s assume monthly payroll costs are $100,000 and a Company qualified for a $250,000 loan (2.5x average monthly payroll). Note these payroll costs are based on a 10-week period (2.5 months). Let’s also assume that payroll costs remained the same during the 8-week period following the loan as it was previously and the loan proceeds were received April 15,2020. Step 1 of forgiveness calculation is below:
Payroll costs incurred April 15-June 15 (8 weeks) $200,000
Rent paid April 15-June 15 10,000
Utilities paid April 15-June 15 4,000
Interest paid April 15- June 15 2,000
Total eligible costs during 8 week period $216,000
Loan amount 250,000
Potential amount required to be paid back $ 34,000
Currently, there is no stipulation that you can’t. Remember,payroll costs are capped at $100,000 annually per employee. Meaning, the maximum paid to an owner or employee during the 8-week period is $15,384. We expect there to be further guidance that may potentially limit the amount of payroll costs, rent and utilities paid during the 8-week period to avoid prepayment of such costs, however as of now there is no stipulation you cannot do this. We will monitor the guidance related to this question as it comes out.
Yes. The loan advance amount (which is not required to be re-paid) received under the EIDL loan will reduce the amount of forgiveness under the PPP loan.
The loan forgiveness calculated in Step 1 is reduced if there is a reduction in the number of employees compared to the base period OR a reduction of greater than 25% in wages paid to employees.
An employee who makes less than $100k annually whose wages were reduced by greater than 25% impacts the calculation of forgiveness. The excess of the reduction in wages that is greater than 25% compared to the employees’ wages in the most recent full quarter lowers the amount forgiven.
You are comparing the average number of FTEs for the 8-week period beginning after the loan is received to either the average FTEs for the period February 15 – June 30, 2019 OR the period January 1, 2020 – February 29, 2020 (at the election of the borrower)
You choose. You would choose which of the two potential periods you had the lowest number of FTEs. The lower the better, as it will make it easier for you to meet the head count and salary requirements when comparing to the current figures.
Yes. Noted in the calculation above, we calculated forgiveness in the amount of $216,000. Let’s assume during the period February 15,2019 – June 30, 2019, you had 20 FTEs. Let’s also assume that during the 8-week period following the loan, you had 15 FTEs. Your loan forgiveness would only be 75%(15/20) of the amount originally calculated. The actual loan forgiveness amount calculated above would be reduced to$162,000 (75% of $216,000).
No. See example directly above. The amount of loan forgiven will be reduced on a pro-rata basis, but not eliminated completely.
It depends. For employees laid off between February 15, 2020 and April 27, 2020, the reduction in headcount and wages related to these employees will NOT reduce the forgiveness IF the employees are re-hired by June 30, 2020. However, the first step of forgiveness is amounts spent on eligible costs, including payroll. If employees are not hired back until the end (or after) your 8-week spending period, you will have spent less of the loan on eligible costs, which negatively impacts the amount forgiven.
No,it is not. The loan forgiveness amount is tax-free.
Not necessarily. It will, however, lower the amount spent on payroll costs during the 8-week period (step 1) that determines the forgiveness amount, as well as further reduce the amount of forgiveness calculated in Step 1 pro-rata by the reduction in head count.
No. First rule of thumb is to make a business decision. If your business is not open,it may not make sense to hire back your employees unless there is productive work that they can do. Not hiring employees back will most likely reduce the amount of the loan forgiveness; however the loan payback is only at a 1%interest rate with no prepayment penalties. Hiring back employees would require the business to pay employer payroll taxes that are not part of the loan forgiveness calculation.
There is no current guidance on this that states employees must be employed after the 8-week period is up. The hope is that the business is up and running after the 8-week period and business owners would choose to maintain employment levels, but if that is not the case, there currently is nothing that would prohibit an employer to lay off the employee at any time they choose. We expect further guidance to be provided in this area.
It will be a case by case basis, but generally speaking there will still be some benefit to a business owner whose business is not yet open. At a minimum, the loan can be used to pay for the owner’s payroll, rent,utilities, and interest on other debt for the 8-week period (this assumes that at the end of the 8 week period anyone previously laid off is rehired and therefore they do not count as a reduction in headcount). The remainder that is not forgiven turns into a low interest loan that provides extra cash to be used once the business does re-open.
Loans are for a two-year period, incurring interest at 1% on the amount not forgiven. No payments are required for 6 months after the loan date.
You will need to file an application with your Bank after the eight-week period. Support will need to be provided for your forgiveness calculation, including support for payroll costs,rent, utilities, and interest. It is important to ensure you are tracking eligible costs and keeping organized records to provide to the bank for support for amounts forgiven.
Definitely. For the most part, the application process and the many questions around it have been resolved. Once the SBA has completely gotten past the application process and businesses are starting to get funded, it will turn its attention to the loan forgiveness part of the program. We expect further guidance on many unanswered questions related to loan forgiveness to come out in the near future.
For additional Paycheck Protection Program Loan Q&As, please visit the SBA website: Paycheck Protection Program Loan Q&A