Success is the Best Revenge

This month we are sharing some new guidelines for the PPP Loan Forgiveness and the actual Application. First, a short, motivational topic on overcoming this crisis.

Success is the Best Revenge. Over the past few weeks, we have been inspired by the ingenuity, hard work, creativity, and staying power of our client-owners and their businesses.  This unprecedented crisis has demanded of you some tough decisions, along with the execution of innovative ideas. Underneath it all, however, is one common characteristic of a small business owner: GRIT. Within the guidelines provided, you have stood up to the COVID-induced impacts, you have rolled up your sleeves, and you have hung on to customers, employees, supply chains and sources of capital.

We have heard feedback from numerous clients that, owing to their positioning prior to the crisis, and strong decision-making during the crisis, their business has remained strong or has recovered quicker than anticipated. Although challenging, successes are showing up across our community. If you do not feel that way, keep pushing and continue to focus on the two most important parts of your business: cash and customers.

As the economy begins to safely re-open, it is time for small-business to declare revenge against the corona-virus impact. Success will be the best revenge.  Celebrate each victory, whether big or small! Share your success with us.  We want to hear from you!  Click on this LinkedIn thread and tag the post with #coronarevenge.

PPP Loan Forgiveness Application and Guidelines
For first-wave PPP borrowers, you are likely around the midway point of the “Covered Period”.  If you have not already, it is time to be making plans for the forgiveness process. To be certain, do not expect the forgiveness process to be any more relaxed than acquiring the funds. Did you know there is different treatment for cash and non-cash payroll items? Do you understand how to take advantage of the “Alternative Payroll Covered Period”?

The SBA has released the PPP Loan Forgiveness Application and Instructions. We are providing a link for your convenience. The application is longer and more tedious and is accompanied with supplemental schedules and worksheets.  Start preparing now:

  • Remember the 75/25 rule and calculate precisely how much you need for qualified, forgivable expenses (e.g. $50K loan = $37.5K eligible payroll costs).
  • Mark your calendar for the end of your “Covered Period”.  If you have a bi-weekly (or more frequent) payroll schedule, you may elect to calculate costs using the eight-week period that begins on the first day of the pay period following the receipt of PPP funds (the “Alternative Payroll Covered Period”).
  • Identify changes to FTEs or any wage reductions greater than 25%.
  • Start tracking payroll costs, keeping in mind the impact of cash compensation vs. non-cash compensation.
    • Cash Compensation.  Cash compensation for each employee cannot exceed an annual salary of $100,000, as prorated for the Covered Period.  Cash compensation includes the sum of gross salary, gross wages, gross tips, gross commissions, paid leave, and allowances for dismissal or separation paid or incurred during the “Covered Period”.
    • Non-Cash Compensation Payroll Costs.  Non-cash payroll costs are NOT subject to the same prorated limit of cash compensation. In other words, you can utilize them toward your loan. These non-cash items include: employer contributions for employee health insurance, retirement plans and state and local taxes assessed on employee compensation (e.g., state unemployment insurance tax).
  • Gather documentation for non-payroll expenses, like rent, mortgage interest, utility payments, and so on.
  • Review the Forgiveness Application and Instructions.

We strongly recommend that you begin to draft the application now.  As you do so, you will learn what to focus on, and how to correctly appropriate your PPP funds over the remaining life of the “Covered Period”, which will minimize surprises when it is time to submit. And of course, discuss questions and concerns with your CPA and Lender.

Additional resources we found helpful when preparing this article:
SBA; Forbes; Gusto.