Question:

What is PPP forgiveness and how does the application process work?

Answer:

PPP stands for Payroll Protection Program. It’s a pretty involved process and we’ll break down the application process and requirements for you here.

First Things First…

The whole application is 11 pages and you’ll want to review the entire forgiveness application before starting. The first page is filled with definitions and most of the rest of the application is guidance. The important thing to remember is that pages 3 and 6 are the required forms that need to be submitted. A general rule of thumb here is to start with page 9, go to page 6, and finish with page 3.

The paperwork gets submitted to your lender first, where your lender has 60 days to review the submitted information and make a determination. Then lender will then submit that information to the Small Business Administration (SBA) who has 90 days to pay the lender the amount you’re not going to pay back. It’s also important to know that if the lender or SBA doesn’t approve your PPP forgiveness, the lender will be upset because they’ll lose their lender fees. This could then turn into a loan for you or even penalties.

General Points To Keep In Mind

There’s a difference between payroll and non-payroll costs. The PPP says 75% of the forgiveness funds need to go payroll and payroll related costs. This includes cash compensation such as wages, salaries, tips, PTO, 401(k), IRA’s, and health plans. As for non-payroll costs, this includes things like rent, loans, utilities, and internet. This amount has to be 25% or less of the overall funds.

There are important time periods to note with all of this. All non-payroll bills you have to pay with the PPP funds had to have been incurred, signed, in place, and already obligating you to pay on or before February 15, 2020. The covered period time is the 56 day period of time from the first disbursement of funds (1st day you received PPP funds). And the main reason why the covered period is important is because for a lot of the application, you will be comparing the January 1st through March 31st, 2020 period versus your covered period.

Start With Page 9, Then 6, Then 3

You’ll want to read pages 7 and 8 first, and then start on page 9. On page 9 you’ll need to include the cash compensation amount and full-time employment. Cash compensation is the gross amount of things such as wages, tips, PTO, and salary. No single employee for the covered period can receive $15,385 or more and still be eligible for forgiveness. The easiest way to calculate cash compensation is by taking the gross amount that you would be paying and multiply it by the 56 day period.

Additionally along with the numbers related to the covered period, you will need to submit paperwork to backup the information. This information can be found on page 10. You’ll want to keep these documents you submit for 6 years for administrative purposes. This way if there’s any mix up or error later down the line, you’ll already have those documents for proof. Things that will be accepted for payroll costs: bank statements; payroll reports (highly recommended to use this!); tax forms (IRS Form 941); cancelled checks; proof of insurance payments. For full-time employment, you can submit employee records. Things that will be accepted for non-payroll costs: lender amortization; receipts; cancelled checks, lease agreements.

Lastly…

If you offer to rehire an employee and they refuse to come back to work, you have to report that information to your state unemployment office. If you don’t report it, it will likely reduce the amount you can have forgiven.

Demographics on your staff and company is not required, but left to your own judgment call. You might be hesitant in submitting this type of information, but it might be important in the long run for record keeping sakes. It also could be for the purposes of insuring that if it’s not right the first time, try to get it right the next time.

To Wrap Things Up….

The PPP Forgiveness Application is a pretty involved process. The main thing to remember about the application is to start on page 9, then go to page 6, then go to page 3. Pages 3 and 6 are the forms you’re required to submit. You can find the application here. As always if you have any additional questions, please free to reach out to our team at bertie@inbetterwetrust.com and we’ll be happy to help you out.