Paycheck Protection Plan

The Payment Protection Program (PPP) deadline has since passed, but challenges for small business owners who have received funds are long from over. The difficulties some owners now face are the correct utilization of funds and the qualifications for full loan forgiveness. To ease the borrower's worries, BSC Accounting would like to present information regarding some frequently asked questions we received from our clients.

How long is the covered period for loan forgiveness?

The covered period for loan forgiveness was extended from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement. This change ensures greater flexibility for borrowers to qualify for loan forgiveness. The 24- week period applies to all borrowers, but borrowers that received an SBA loan number before June 5, 2020, have the option to use eight weeks.

How much of the PPP Loan must be used for payroll?

60% of the total loan amount must be spent on payroll costs. The remaining 40% can be allocated towards qualifying expenses; such as rent, mortgage interest, and utilities if they were in use before February 15th, 2020.

What is the maturity date of the PPP loan?

PPP loans received on or after June 5th have a five-year maturity. However, PPP loans received before June 5th have a two-year maturity, but the terms of the loan can be negotiated with the lender and extended to five years.

How do I qualify for 100% loan forgiveness?

To qualify for 100% loan forgiveness, you must attempt to rehire all laid-off staff, avoid other layoffs, keep all full-time staff close to their full salary. The borrower must maintain at least 75% of the original pay for each employee. If the employee’s pay over the eight weeks is less than 75% of the pay they received during the most recent quarter, the eligible amount for forgiveness will be reduced by the difference between their current pay and 75% of the original pay. You can rehire any staff that was laid off or put on furlough, and reinstitute any pay that was decreased by more than 25% to meet the requirements for loan forgiveness. If any changes were made due to COVID-19 between February 15th and April 26th you have until December 31st to do so.

To make it easier for borrowers, many lenders have apps or software to track the spending for payroll and your FTEE (Full-time Equivalent Employee). This information is especially important for business with many employees (retail stores, restaurants) if they want to avoid headcount reduction on the forgivable amount. When filling out the application, make sure to pay extra attention to the Covered Period. It can be as many as four different time frames.

If you need help with calculations or understanding the changes to the PPP guidelines, BSC Accounting is here for you. Please contact us for a consultation to see what we can do for you.