This is what we have been able to glean so far from SBA and Department of the Treasury notices (along with CPA and Law firm interpretations).
The SBA will be relying on banks to gather and submit the required paperwork for PPP Loan forgiveness. Fully expect some banks to ask for more documentation than others. Some banks are asking for the PPP funds to go into a separate account. Keep very good records and be prepared to submit details.
Loan forgiveness will be based upon maintaining headcount, maintaining wages for each employee and payroll cost/other cost ratio.
Headcount reduction is determined by dividing the base FTE headcount during the 8 weeks of the PPP loan by the base FTE headcount during the look back period. The look back period is either from 1/1/20 to 2/29/20 OR 2/15/19 to 6/30/19 at the borrower’s discretion. There is no definition yet of full-time equivalent (FTE) employees. Until that is issued, the best advice is to use 30 hours of part-timers = 1 FTE as that’s been used before by the agencies involved.
Forgiveness is reduced for not maintaining wages per employee. The lookback period for wage level is 1st Q 2020. If any employee’s salary is reduced by more than 25% during the 8 weeks of the PPP then the forgiveness is reduced dollar-for-dollar by the dollar amount of the portion beyond the 25% reduction. For employees earning more then $100,000, reductions are only considered if the employee ends up below $100,000 annualized in the more than 25% reduction. There has been no guidance given yet on how to calculate or compare these periods, for now, best advice is to use a weekly average for both periods.
And lastly at least 75% of the forgiveness must be payroll costs. Payroll costs include wages, commission, tips, paid leave, insurance premiums, retirement contributions, etc. Wages above $100,000 annualized to any single employee are excluded. The rest (up to 25%) must be for mortgage, rent or utilities. If more is spent in non-payroll categories the forgiveness will still cap based upon the 75% / 25% ratio.
There is no final guidance on the order of reduction, but everything I have read is presuming that the headcount reduction will be first and then the wage level reduction and then the 75% / 25% calculation will be last. In most cases this produces the biggest overall reduction in forgiveness so it’s safest for projections.
A company had 10 FTE employees during the preferred look back period. During the PPP period they had 6 FTE employees. They reduced 1 of the employee’s wages by 30% (by reducing their hours average from 30 to 21 but keeping their rate at $11.00 an hour). During the PPP period they spent $30,000 on payroll, $4,000 on rent and $2,000 on utilities. They are looking for $36,000 in forgiveness.
They have a 60% reduction due to headcount, therefor $21,600 is eligible for forgiveness.
The wage reduction beyond a 25% reduction is $132 for the 8 weeks, therefor $21,468 is eligible for forgiveness.
Their payroll was 83% of the total, so the rent/utilities forgiveness is not reduced, therefor $21,468 is eligible for forgiveness.
The remaining $14,532 becomes a loan at 1% to be paid back over 2 years.
I don’t think I quite made the 1 sheet reference target, and even still this misses a lot of the finer details.
There are a couple of ways that employers could not keep headcount or wage levels during the 8 weeks of PPP but restore them by 6/30/20 and still get forgiveness, but there are no details at all on how that works or how long after 6/30/20 they’d have to keep those levels restored so I’ve left that off.
Future guidance may change everything here. Feel free to reach out to me if you have any questions, and I’ll do my best to help.
My Friend and Business Associate found this great information online. I wanted to pass it along.
Please consider talking with Katie about Human Resources issues, including payroll.COVID-19 Response Funds
Illinois COVID-19 Response Fund
For the People Collective Artists of Color Emergency Grants
America's Food Fund (National with Illinois Partners)
Arts for Illinois Relief Fund
Illinois Council on Developmental Disabilities Relief Fund
Illinois Humanities COVID-19 Emergency Relief Grants
Blue Cross Blue Shield of Illinois COVID-19 Community Collaboration Fund
Illinois Arts Council Agency Emergency Relief Fund
Serve Illinois Commission on Volunteerism and Community Service
Archdiocese of Chicago
Chicago Federation of Musicians Relief Fund
Big Shoulders Fund
The Resurrection Project Rapid Relief Fund
Cook County's Community Recovery Initiative
A Better Chicago Emergency Relief Fund
City of Chicago Small Business Resiliency Fund
Chicago Theatre Workers Relief Fund
Chicago COVID-19 Journalism Fund
Chicago Community COVID-19 Response Fund
3Arts Artist Resources
Brave Space Alliance Crisis Pantry and Mutual Aid
#LetUsBreathe Collective's Stimulus Package for Humanity City of Chicago COVID-19 Artist Relief Information Page
Open Door Advisor's COVID-19 Emergency Relief Funding Opportunities Guide
DuPage Foundation Fund
Community Memorial Foundation COVID-19 Urgent Response Fund
Evanston Community Foundation Rapid Response Fund
Fox Valley Grantmakers COVID-19 Response Fund
United Way of Northwest Illinois COVID-19 Response Fund
Community Foundation of Grundy County Disaster Fund
Community Foundation of Kankakee River Valley Emergency Response Fund
Knox and Warren County
Galesburg Community Foundation Rapid Response Fund
United Way of Lake County, Lake County Government, Lake County Community Foundation, and the Lake County Municipal League COVID-19 Response Fund
Community Foundation for McHenry County and United Way of Greater McHenry County COVID-19 Response Fund
Morton Community Foundation Disaster Relief Fund
Oak Park River Forest
Oak Park-River Forest Rapid Response and Recovery Fund
Quad Cities Community Foundation Disaster Relief Fund
United Way of Quad Cities Actions & Info
Community Foundation of the Quincy Area COVID-19 Nonprofit Response Fund
Southeastern Illinois COVID-19 Relief Fund
Community Foundation for the Land of Lincoln and United Way of Central Illinois COVID-19 Response Fund
United Way of Will County COVID-19 Response Fund
In true blog fashion, the last parts are at the top of the page. Scroll all the way down and work your way back up to read them in order.
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