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PPP 2020 What You Need to Know

Things are constantly changing with the PPP and here are PPP Updates you will want to ensure you understand thoroughly as it will impact your forgiveness process and dollars!

  1. There are 2 forgiveness PPP applications. The updated PPP loan Forgiveness Application and an EZ PPP Forgiveness Application.
  2. Among the changes in the PPP over the last few weeks are that the SBA is expanding the 8 week period to 24 weeks, reduction of payroll costs from 75% to 60% and the establishment of a safe harbor for businesses that have been unable to return to the level of business activity prior to COVID-19.
  3. Revised PPP Loan Forgiveness application includes changes for FTE to be applied as of the date of the application vs waiting until Dec 31 2020. It is encouraged that you do not wait until the end to apply though. Apply as soon as you have spent the dollars and meet the various requirements; which vary depending if you are using the 8 week or 24 week option.
  4. Borrowers that received the PPP loans prior to June 5, 2020 can choose between using the original 8 week period or the new 24 week period.
  5. New EZ application can be used by those:
    1. Who are self employed and have no employees,
    2. Did not reduce the salaries of their employees by more than 25% nor reduce the number of hours of their employees or
    3. Those that experienced reductions in business activity and did not reduce the salaries or wages of their employees by more than 25%.
  6. The new 24 week allows maximum loan forgiveness at $46,154 per employee vs the $15,385 for the 8 week. NOTE: Schedule C filers do not get to increase their owner compensation during the 24 week period to that level. It is still a maximum of $15,385 for the 8 week period (8/52 of the 2019 Net Profit) and $20,833 for the 24 week period (2.5/12 of the 2019 net profit). It’s the fine print here that will catch some so be sure to visit with your Accounting Professional.

Check out these 2 resources for more information:

  1. US Department of the Treasury website here.
  2. New PPP Application released here.

Many have already surpassed the 8 week point and still banks are not accepting forgiveness applications. SBA was quick to give funding and kept the rules very vague but weekly almost we are learning more and more details. They have yet to give firm guidance to lenders so that they feel comfortable opening up the forgiveness process. We are hoping by end of July 2020, but we may find it will go into August before we can start applying.

No one knows if they’ll continue to review and revise the PPP forgiveness process or if we’ll start to see banks accepting forgiveness applications soon as some PPP recipients have already completed the 8 week period. The key is applying sooner than later once you have spent the dollars within the guidelines and banks have opened for the forgiveness applications. Don’t wait unnecessarily as you may find ongoing changes to be unfavorable… it’s hard to know.

Keys to having the forgiveness process go smoothly for you are to:

1. Have good accounting records.

2. Ensure you read the fine print on what you can spend the dollars on.

3. Keep copies of bank statements and bills to provide the documentation your lender is likely to want.

4. If you don’t have a good relationship with an accountant, now is the time as they are more valuabe than ever before.

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