What you need to know about PPP, EIDL and CARES Act

There is a lot going on with PPP, EIDL and CARES Act and we are working feverishly trying to stay updated on it. We are mainly focusing on PPP as that is the main time sensitive focus for us at this time with the 8 week time frame and now the updated 24 week time frame. Though if you have spent the money in the 8 weeks, you want to stick with that as the 24 week brings both benefits and downsides depending on your particular situation.

This is not meant to be all inclusive, only for a starting point for you as you begin and work through this process. This is a very gray area and things are changing daily so please take everything you read with a grain of salt as the final decision about PPP forgiveness hasn’t really been provided to the banks yet so we are still waiting for those details to come. Each business owner/manager will need to visit with their accountant to discuss specifics as there are a lot of variances with these programs.

Here are some great PPP resources we have compiled so far and we’ll add more as we have more information to share.

First of all what is/isn’t included in the PPP.
1. At a high level, the calculation consists of the fact that as a small business, you can apply for 2.5 times your average monthly payroll which includes gross payroll, state unemployment, retirement contributions and group health insurance. Read the following for more specific details.
  1. Please be aware that the company’s share of matching for social security and medicare does NOT get to be included in this calculation.
  2. Neither do 1099 contractor payments because they were eligible to apply for PPP on their own.
2. Treasury Fact Sheet
3. Who can apply for PPP?
4. Understanding the PPP
5. Here’s what you need to know about the forgiveness of the PPP. Click here
  1. The updated loan forgiveness application as of 6/17/2020 can be found here along with further clarification on what can be included.
  2. You can ready more on the US Department of the Treasury website here as well.
6. How can you spend the PPP funds? At a minimum, 75% of the PPP funds should be spent on payroll costs as outlined above. The other 25% can be spent on payroll or they can be spent on allowable costs such as transportation, rent, utilities, and mortage and other certain debt obligation interest. This has been updated to be 60/40% but there are new rules and timelines with the 24 week period that you need to better understand.
  1. Please note that if you are using the 8 week forgiveness period, the payroll caps out at $15,385/per person but with the 24 week period, it caps out at $46,154 per person. This is a HUGE opportunity for businesses to ensure they utilize all dollars towards forgiveness but don’t forget to read the fine print as their are other changes as well. This applies to employees, but does not change for owners those who file Schedule C. You guessed it!! There’s going to be a lot more details you are going to need to review carefully.
7. NOTE: As it relates to forgiveness, you can only spend 2/3 of the payroll portion on nonpayroll expenses. Therefore if you spend $60,000 on covered payroll expenses, then your maximum nonpayroll expenses cap out at $40,000.
8. Decreased FTE calculations also reduce your allowable forgiveness and the timeline varies whether you are doing the 8 week or 24 week calculation.
  1. PPP Eligible Expenses
  2. You got your PPP funds, now what?
  3. Frequently asked questions about PPP
  4. Keep the focus of PPP Intent as you spend
Not familiar with the SBA PPP and EIDL programs? Check out this site for more info on the SBA programs.
Here are some resource articles to check out.
Key thing is to work with your accountant and fully understand how these programs benefit you and your specific situation. There are lots of moving parts and the information is changing almost daily with more clarity, etc. We are working very close with our clients to ensure that they’ll have the highest chance of forgiveness possible. Though understand your accountant can’t work miracles. You have to be ethical and accurate in how you are spending the funds and ultimately your lender has the final say as to what is and isn’t forgivable.
Know that the lending was fast and gray and now we are in the midst of getting clarity so things are changing regularly. Don’t spend the dollars in a way that you wouldn’t want it coming out of your own pocket. That’s essentially what this is. Be ethical when you apply, how you spend the dollars and report the information.
If you received the EIDL (Economic Injury Disaster Loan) advance and the PPP, please know the amount of the EIDL advance will reduce the forgivable part of the PPP.
This does not cover back pay or future pay or expenses. It is meant to cover the current expenses you are incurring during the 8 weeks of PPP.
Here are my top tips on what you should do regarding PPP:
1. Ensure the calculation is correct when you apply and that you only include the appropriate payroll related costs.
2. Ensure you have the accurate FTE (full time equivalent) number on the application as this is a critical part to forgiveness. You must have the same or higher FTE at the end of the 8 weeks as part of the forgiveness calculation. If you don’t then part of your loan is automatically not forgiven.
3. Ensure that your employees are not receiving unemployment funding. The whole purpose of the PPP was to keep staff off of unemployment. This means you may be paying them to do other activities and/or even if they are not working.
4. Ensure that you are tracking the expenses correctly and know that the date of the funding is when your 8 weeks starts. This means the date on the check and/or date of direct deposit. Then it is 8 weeks from there (not 2 months or 60 days) but really 56 days (7 days x 8 weeks). Don’t wait and spend the money on the 56th day as that may cause dollars to be excluded in the calculations. They want to see that the business has released the funds (ie used them during the time) so I recommend to our clients that they ensure those dollars have left their hands before the 56th day hits.
5. Keep a weekly diary of how COVID 19 has impacted your business, there are varying degrees people are placing on the importance of being able to show you “needed” the funds during this time. Though if your bank requests a recap, by keeping a weekly commentary of how you’ve been impacted will help with this. This can include jobs you’ve lost, hours you’ve had to reduce being open, etc that show the negative hit your company took due to the coronavirus.
6. Ask your lender for specific guidance on what they will want as documentation for forgiveness. Don’t be surprised if they tell you they don’t know yet. We are expecting that clarity to come closer to middle of June at the 11th hour for some.
7. Keep copies of bank statements, utility bills, and anything else you can do to show proof of how the money was spent within the guidelines given.
8. Prepare a recap spreadsheet to give to the banker outlining how the dollars were spent so it is easy for them to see

Stay tuned and more information will be posted as we have updates. If you want to review your financials and reports, please schedule an appointment today for your week 6/7 so we can see where expenditures are sitting and make recommendations. Don’t wait as time will be of the essence! Information is changing constantly. Here’s the latest that we are waiting to hear if it passes.

Will PPP be extended?

Now they’ve extended it to 24 weeks but there are things you need to know.

New revamps on the PPP that were signed by the President.
Understanding the 60/40% . Read here

Here are some great PPP resources we have compiled so far and we’ll add more as we have more information to share.

Here are additional resources we’ve compiled for EIDL and the CARES Tax Credit: