PPP Forgiveness Now Made Easy
By Paul Thorstenson, CPA/ABV, CVA
SBA has revised its PPP application to accommodate the new 24 week rules. But more important, they have issued a new EZ form. Great news….as it is certainly very simple!
With the 24 week extension, It will be very difficult for any small business NOT to have its loan entirely forgiven. Undoubtedly, this fact is the genesis of this very simple form.
Remember the forgiveness calculation first requires you to sum all allowable costs in the 24 week period, and then multiply that sum times the FTE quotient. Because the loan amount was calculated at 2.5X monthly payroll, a business that has not “missed a beat” after receiving its loan should spend roughly 220% of its loan amount on allowable expenses during the covered period. Better yet: Even a business that has reduced its headcount by 50% during the covered period, might still achieve total forgiveness.
For example:
| Loan Amount | $100,000 | |
| Allowable expenditures in Covered Period | $200,000 | A |
| Times FTE Quotient | 50% | B |
| Forgivable Loan Amount | $100,000 | A* B |
I estimate that roughly half of all small businesses will be able to use the EZ form. If you meet any of these requirements, you can use the EZ form:
- Self Employed and have no employees; OR:
- Did not reduce wages by more than 25% AND did not reduce the number of hours of employees from January 1, 2020 to end of 24 week period. You don’t have to count any employee reduction from the inability to rehire qualified replacement workers, or if an employee refused to work; OR:
- You were unable to operate your business between February 15, 2020 and the end of the covered period at the same level of activity due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the CDC, or OSHA relating to the maintenance of sanitation, social distancing, or ANY other work or customer safety requirement relating to COVID-19.
The third item will obviously apply to a vast array of businesses. Some obvious businesses come to mind including: restaurants, bars, casinos, personal grooming businesses, medical offices, dentists, etc.
But what about a business, which has reduced headcounts PRIMARILY because of lack of customers, like a hotel? These borrowers are probably stuck with the long form.
OWNER COMPENSATION—PPP FORGIVENESS
The new rules/forms clarifies that the maximum compensation allowed for any owner (including employee owners) is capped at 2019 compensation (not to exceed $100,000) times 2.5/12. The 2.5X was how the loan amount was calculated to begin with, which translates to certain total forgiveness for any sole proprietor.
EIDL LOANS AND ADVANCES
If you missed out on EIDL loans and the $10,000 advance/grant the first time around, you now can apply. Remember, the $10,000 advance/grant has to effectively be paid back if you also have a PPP loan. Here is the link to the application.
https://www.sba.gov/page/disaster-loan-applications
Remember, the EIDL loans are not forgivable. Here is what you need to know:
https://www.sba.gov/sites/default/files/articles/EIDL_and_P3_4.1.2020_FINAL_2pm.pdf
At KTLLP we have a team assisting with the preparation and review of PPP loan applications. If you have met the requirements as of the 8 week period, we can work with you to prepare the applications as soon as your 56 day period expires. Email [email protected] to enlist our assistance.
