PPP 2020 What You Need to Know

Things are constantly changing with PPP and here are the PPP updates you’ll want to make sure you fully understand as they will affect your tolerance and funds process!

  1. There are two implementations of PPP tolerance. Request for forgiveness of the updated PPP insurance and application of the tolerance of the PPP from EZ.
  2. Among the changes to the PPP over the past few weeks is that the SBA is expanding the 8-week period to 24 weeks, reducing payroll costs from 75% to 60% and creating a safe haven for businesses that were unable to return to a pre-COVID-19 level of business activity.
  3. The revised PPP Insurance Forgiveness application includes changes to the FTE to be applied as of the application date versus waiting until December 31, 2020. It is recommended that you do not wait until the end of the application. Submit your application as soon as you spend the dollars and meet the various requirements; Which varies depending on whether you use the 8-week or 24-week option.
  4. Borrowers who obtained PPP insurances before June 5, 2020 can choose between using the original 8-week period or the new 24-week period.
  5. The new EZ app can be used by those:
    1. who are self-employed and have no employees,
    2. It did not reduce the salaries of its employees by more than 25% and did not reduce the number of hours of its employees or
    3. Those who experienced a decline in business activity and did not reduce the salaries or wages of their employees by more than 25%.
  6. The new 24-week week allows for maximum insurance forgiveness of $46,154 per employee compared to $15,385 for the eighth week. Note: Schedule C senders are not entitled to increase the owner’s compensation over a 24-week period to this level. The cap is still capped at $15,385 for the 8-week period (52/8 of 2019 net profit) and $20,833 for the 24-week period (2.5/12 of 2019 net profit). It’s the fine print here that will attract some so be sure to visit with your accounting professional.

Check out these two sources for more information:

  1. The US Treasury website is here.
  2. A new PPP app has been released here.

Many have already crossed the 8-week point and banks are still not accepting pardon requests. The SBA was quick to introduce funding and kept the rules very vague but almost weekly we’re learning more and more details. They have not yet given firm guidelines to lenders so that they feel comfortable opening the forgiveness process. Hopefully by the end of July 2020, but we may find it starts in August before we start applying.

Nobody knows if they will continue to review and review the PPP exemption process or if we will start seeing banks accept requests for forgiveness soon as some PPP recipients have already completed the 8-week period. The key is to apply sooner rather than later once you have spent the dollars within the guidelines and the banks have opened requests for forgiveness. Don’t wait unnecessarily as you may find ongoing changes unfavorable… It’s hard to tell.

The keys to a smooth forgiving process for you are:

1. To have good accounting records.

2. Make sure you read the fine print of what you can spend your dollars on.

3. Keep copies of bank statements and invoices to provide documentation that the lender will likely need.

4. If you do not have a good relationship with an accountant, it is time that they are more valuable than ever.