The 3 Most Important Things You Need to Do Now for PPP Loan Forgiveness
Did you receive a Paycheck Protection Program (PPP) loan during the pandemic? Are you waiting until the end of your 8-week or 24-week loan period to review our resources on loan forgiveness? If so, this blog is for you!
Here are the 3 most important things that you need to do now in order to prepare for your forgiveness application:
DO NOT PROCRASTINATE
This is truly not the time for procrastination - unless you enjoy hating your life, feeling overwhelmed, and rushing around at the last minute to complete a bunch of detail-oriented paperwork requiring a ton of documentation, case-by-case decision-making, and math.
Hmmm… enticing, but… a pretty emphatic ‘no’ from me on this one!
Start collecting and organizing as much documentation as you can now.
This includes payroll records, receipts, invoices/statements, etc.
Decide which loan-covered period you’re going to use
If you received your PPP loan before June 5, 2020, you’re going to need to decide if you’re going to use the 8-week or 24-week period, and if you choose the 8-week period, consider whether to use the standard or alternative (if eligible) loan-covered period
Begin to track and organize documentation pertaining to eligible costs paid and incurred during the 8 or 24-week period. If you received your loan after June 5th, you will be using the 24-week period (Note: the 24-week period individual salary cap is different than if using the 8-week period)
Review the application and instructions in full, and do it now!
Review our guide to filling out your PPP Forgiveness application. You really do need to understand what this application entails and schedule yourself time to complete it at the end of the loan period. The more employees you have, the longer it will take. Don’t find yourself scrambling at the last minute
GET FAMILIAR WITH FTE CALCULATIONS AND TRACK HOURS PAID
Full-time equivalent employee calculations are not as simple as saying “I employ 10 full-time staff members.” Part-time employee hours also count towards determining the total number of FTEs in your employ. A reduction in FTEs during the covered period will result in a reduction in the amount forgiven.
The biggest misconceptions I continue to see include, “But we don’t have the hours right now,” or “How am I supposed to pay employees when we’re still closed?”
Okay, valid points, but remember the purpose of the PPP loan: To keep employees on payroll with their same, steady paycheck even though your business was closed or had to reduce hours. It was never intended to require employees to perform work in order to be paid. It is essentially another means to keep people afloat during this crisis outside of state unemployment systems with limited and finite funding. If your employee usually works 30 hours per week but you can only give them 10 right now, or if you’re still closed altogether, that’s fine - but continue to pay them for 30. That’s exactly what the money is for.
UNDERSTAND THE SAFE HARBOR EXEMPTIONS AND EXCEPTIONS
FTE reductions caused by a reason specified in the safe harbor exemptions and exceptions will not reduce the amount of your loan forgiven. These safe harbor exemptions and exceptions include:
Employees who decline a written offer for re-employment;
Employees who are terminated for cause, who resigned voluntarily, who voluntarily requested and received a reduction in hours;
Employees whose salaries are restored to their previous wages if reduced during the covered period;
Restoration of FTEs to the same level as before the covered period if restored by December 31, 2020;
Reductions in FTWs due to compliance with CDC, HHS, or OSHA COVID-related safety regulations/guidance
The forgiveness application is going to be more cumbersome than your initial loan application. You will need to maintain organized and detailed records to complete your application and prove your expenses and costs. Don’t wait until the last minute. Start planning and preparing now!