The Coronavirus Aid, Relief and Economic Security Act (CARES Act) allocated $349 billion to the Paycheck Protection Program (PPP) to be administered through the Small Business Administration (SBA). In just 12 days of the program being open all of the funds were distributed. While many applicants are still wondering if they made the cut to receive funds, questions surrounding how much qualifies for forgiveness are already bubbling to the surface.
If you missed the first round of funding, don’t delay. If you have not already applied, do so now with your bank as many are holding the applications awaiting the start of the new funding.
The Interim Stimulus Plan added another $310 billion to the Paycheck Protection Program (PPP) administered by the Small Business Administration (SBA). The CARES Act originally allotted $349 billion to the program, but those funds were depleted in less than two weeks. The bill added $310 billion in funding for the PPP and $60 billion to the Emergency Economic Injury Disaster Loan (EIDL) program. The bill did not expand eligibility or increase loan caps. So, if you were not eligible to receive funding in the last round, you still will not qualify in this round (sorry 501(c)(6) organizations). Below is what we know right now about the new funds:
We know there are four categories of expenses that will qualify for forgiveness under the CARES Act. Payroll, Rent, Utilities, and Interest. Let’s go into a bit more detail on each of these.
Payroll costs
Include the following:
Payroll does NOT include the following:
Rent
This would include payments under a lease that was in signed before February 15, 2020. It is inferred but unknown if this is intended to only covers space(s) used for your business or would also cover personal property leases. We are inclined to think that it was intended to cover real property leases.
Utilities
This is defined as electricity, gas, water, transportation, telephone and internet services. The service must have begun before February 15, 2020.
Interest
The obligation must have begun before February 15, 2020. This covers both real and personal property where a UCC-1 was filed. This does not include unsecured debt. Further principal payments are not considered in the forgiveness of the PPP.
To apply parts of the loan for forgiveness, businesses can submit a request to their lenders. We encourage you to talk with your YHB team member to assure you are calculating and tracking use of these funds appropriately. Requests must include documents verifying the number of full-time equivalent employees and pay rates, as well as the payments on eligible loan, lease and utility obligations.
As quickly as the Act was passed and funds distributed, questions regarding specific requirements about forgiveness remain unanswered. Below are questions the SBA has yet to provide clear guidance on:
While specific guidance to the many unique situations our clients encounter isn’t available yet, there are some smart moves you can make now to assure you receive the maximum forgivable amount.
With the size of this unprecedented program and speed at which it was passed and funded, there are still too many unanswered questions. We are watching the SBA, Treasury and other governing bodies for further guidance. What we do realize is that this funding is needed, welcomed by many, and making a significant difference in our client’s businesses and lives. We encourage you to contact your YHB team member with questions as each situation is unique and to continue to check our COVID-19 Resource page for updates.