Good morning! We are continuing our regular client alerts during this time in order to keep you informed on changes, updates and new opportunities to find funding and support for your business. Here are some of the latest updates:
SBA Emergency Funding
As you may have seen in the press, both major SBA programs initiated by the CARES Act, the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL), have had their funds exhausted in the last two week.
However, it is worth noting that Congress is currently debating adding an additional $250 Billion in funds to PPP alone, with a similar plan to replenish EIDL and other initiatives.
While we cannot know what tomorrow holds for sure, it is a reasonable conclusion that one or both programs will see further funding in at least one or multiple additional rounds of Congressional appropriations.
Since both programs are essentially operating on a first-come, first-served basis, this is not the time to stop working on applications or withdrawing ones already in process. Instead, it’s imperative to stay in touch with your bank (for the PPP program, which is administered through SBA-approved lending partners), and to be ready for a new application window to open up for the EIDL direct program with SBA.
PPP Loan Details
For the PPP program, many small business owners have become confused by both the loan proceeds requirement and the parameters to achieve loan forgiveness. Here are some points to help with both.
PPP Use of Proceeds
In summary, PPP loan proceeds can be used for:
- Gross Payroll (minus compensation greater than $100K/year, FFCRA wages applied to tax credits, or labor covered by Section 3610 contract payments).
- State Payroll Taxes
- Employee Benefits (such as health insurance, retirement funds, etc.)
- Rent and Utilities (up to 25% of total proceeds used).
Note that it will be important to document your ‘draws’ clearly from the separate operating accounts in order to track proceeds applied up to the total allowed amounts.
PPP Loan Forgiveness
The other aspect of the PPP program that can spark confusion is the process of calculating the amount applicable to loan forgiveness. The forgiveness of a PPP loan requires a three-step analysis based on the following three metrics: Reduction in Headcount, Reduction in Wages, and Rehires. Here are the key points:
- Reduction in Headcount – Take the average number of full-time equivalent employees (FTEE) per month for the eight-week period following the loan date, divided by the the lower of FTEEs per month for either the period of 2/15/2019-6/30/209 or that of 1/1/2020 – 2/29/2020.
- Reduction in Wages – Subtract from the result above all reductions in wages for staff under $100K/year (this requires a series of calculations that we can review with you).
- Rehires – Reduction in Headcount can be avoided if by 6/30/2020 the reduction in FTEEs from 2/15/2020 through 4/26/2020 has been restored and/or Reduction in Wages can be avoided if by 6/30/2020 the applicable employees have been restored to their earnings rate as of 2/15/2020.
Note: The Rehire step is meant to motivate companies to use loan proceeds to restore headcount and wage levels. If you do both, then the full loan amount can be forgiven. If you do one or the other, then one reduction, or the other, can be ignored but there is no proportional relief for restoring part of one or part of the other.
The SBA continues to produce new and revised guidance on this program, which may result in changes to the information presented here, and this information should not be relied upon as the final determination of your potential PPP loan forgiveness amount.
New Grants for Small Businesses Impacted by Covid-19
Arlington County GRANT (Giving Resiliency Assets Near Term) Program
Arlington County, Virginia has established an emergency grant program for county businesses. Details here: https://www.arlingtoneconomicdevelopment.com/covid-19/grant-information/
U.S. Chamber Foundation Save Small Business Grant Program
This program begins accepting applications on April 20, 2020 at 3:00 PM EDT. Details here: https://savesmallbusiness.com/
Facebook Small Business Emergency Grant Program
This program is also rolling out on April 22, 2020 to the Washington, D.C. region. Details here: https://www.facebook.com/business/boost/grants
As always, if you have any questions, please reach out to me or to any member of our BradyRenner CPAs team.
Matt Brady, CPA