PPP LOAN FORGIVENESS AND
THE NEW FLEXIBILITY BILL
VIRTUAL WORKSHOP
FRIDAY, JUNE 19, 2020
10 -11:30 AM
BROWARD COUNTY OFFICE OF ECONOMIC AND SMALL BUSINESS DEVELOPMENT
Broward.org/EconDev
NDC P3 Project:
Yonkers Public Library
Yonkers, NY
What You Need to
Know about the New
Forgiveness Rules
National Development Council
June 19, 2020
www.ndconline.org
Today’s discussion
4
• Who is the National Development Council and Grow America Fund
• What is the Paycheck Protection Program (PPP)
• What are the changes to PPP forgiveness and how will it benefit
your business?
• How do I apply for a PPP Loan through Grow America Fund?
• FAQs about PPP forgiveness
About NDC
5
About GAF
6
• Community Development Financial institution (CDFI)
licensed to make SBA 7(a) Loans across the county
• Procced Over 70MM in PPP loans to 650+ businesses
• Lending program designed to catalyze job creation in
underserved communities.
NDC & SBA
7
GAF’s Advice to business owners
8
• Be patient! Do not Panic! If you have not yet applied for PPP, you
can still do so
• The rules around loan forgiveness has evolved over the past few
weeks to benefit small business owners. Pay attention to
updated guidance which may be beneficial. Consult your Lender
if you have specific questions
• There are no “experts” with more knowledge about PPP – be
careful incurring additional expenses with third party “Experts”
who claim they can assist in your forgiveness application
What is the Paycheck Protection Program (PPP)?
9
• SBA Loan program administered by the SBA but processed by
SBA approved Lenders (i.e. Banks, CDFIs, Credit Unions, and
Fintech lenders)
• Loan Amount = 2.5x your average monthly payroll
• Applications accepted until funds run out
• In round II, there is still about $100 Billion remaining. If you have not yet applied, there
is still an opportunity
Changes to the loan forgiveness regulations
10
• On June 5
th
, the Paycheck Protection Program Flexibility Act was signed into law
which provides businesses with more time and flexibility to obtain loan
forgiveness on their PPP loan
Originally Amended
Forgiveness Period 8 weeks 24 weeks
Minimum amount spent on
payroll
75% 60%
Deadline to bring back
employees
June 30th December 31
st
Loan Term 2 years 5 years
Deferral Period 6 months No payments
required until loan
forgiveness has
been determined
What do we need to know about the application?
11
• You must apply for forgiveness
• It is the PAYCHECK Protection Program – payroll costs are the guide –
remember the 60/40 rule
• The “Covered Period” is the 24 weeks AFTER the RECEIPT of funds
• The “Alternative Covered Period” is the 24 weeks AFTER the first day
of the business first pay period following receipt of the funds
How to MAXIMIZE my forgiveness
Payroll (60% or more) and Non-Payroll Expenses (up to 40%)
12
PAYROLL EXPENSES
• Salaries
• Commissions
• Payment of cash tips (up to an annual rate of pay of
$100,000)
• Employee group health care benefits, including
insurance premiums
• Retirement contributions
• Employee Benefits including costs for vacation,
parental, family, medical or sick leave
• Income or net earnings from self-employment
(Schedule-C for Sole Proprietors)
NON-PAYROLL EXPENSES
• Interest payments on mortgage obligations, incurred
before 2/15/2020
• Rent, under lease agreements in force before
2/15/2020
• Utilities, for which service began before 2/15/2020
• Interest on other debt obligations, previously incurred
How do I document?
Must be submitted with Application
13
Payroll
Reports from third-party payroll provider, IRS Form 941, cancelled checks or paystubs
Rent
Cancelled checks, receipts, or similar documentation showing rent payment, copy of lease agreement to
substantiate that it was in effect before 2/15/20
Utilities
Copies of utility statements and proof of payment (bank statement, cancelled checks)
Mortgage interest
Copies of mortgage statement and proof of payment (bank statement, cancelled checks)
Frequently Asked Questions
Eligible Expenses
15
My business is home-based, and I do not have any eligible expenses to include towards the 25% that can be used
for “other.” What are my options for loan forgiveness
If you are able to reach the full loan amount with payroll costs, you are eligible for full loan forgiveness. If you
are not able to do this, you will have to repay the remaining balance as a loan.
I am not a sole proprietor or independent contractor. As an owner, is my “owner compensation replacement”
limited to the same calculation as sole proprietors and independent contractors (which is 8/52 weeks’ worth of the
2019 net profit?)
Yes, all business types that use self-employment income will use the same 8/52 weeks calculation. This includes
partnerships and LLCs which used self-employment income from Line 14a on Schedule K-1 and sole
proprietorships and LLCs that used the net profit from Schedule C.
Frequently Asked Questions
Eligible Expenses
16
Can I use funds to pay independent contractors and have this count towards loan forgiveness?
No, payments to independent contractors are not an eligible payroll expense
What types of taxes paid count toward loan forgiveness?
You can count payment of state and local taxes assessed on employee compensation towards
payroll costs. Taxes imposed and withheld from the employee can also be included as payroll
costs and count towards loan forgiveness. Federal payroll taxes which are imposed on the
employer are not and eligible payroll cost and do not count towards loan forgiveness
Frequently Asked Questions
Eligible Expenses
17
I provide healthcare coverage for my employees with families. Is the full payment of healthcare
benefits in these situations counted towards forgiveness? OR only the portion for the employee?
Yes, you can include all healthcare costs in the calculation, regardless of whether it is for an
employee or their family as part of a larger coverage plan
I have been paying health insurance premiums (COBRA payments) for my laid off staff who has
health insurance through us previously. Can I include this in my loan forgiveness?
Yes. If the employee’s leave is not covered under the Families First Coronavirus Response Act,
this expense qualifies as an eligible payroll cost and can be included with the loan forgiveness
calculation.
Frequently Asked Questions
Eligible Expenses
18
I take a monthly “draw” from my checking account. This does not show on my payroll reports. Can
this count as an eligible payroll cost?
No, this does not count towards payroll costs. This would be incorporated into the owner
compensation replacement figure.
What types of interest qualify as “mortgage interest” to qualify as an eligible expense for loan
forgiveness (e.g. interest on equipment leases)?
For interest to qualify as an eligible expense for loan forgiveness, the debt must be incurred in
the ordinary course of business that (a) is a liability of the borrower; (b) is a mortgage on real or
personal property; and (c) was incurred before February 15, 2020.
Frequently Asked Questions
Forgiveness Calculation
19
When does my 24-week period start? When I signed the loan documents or when the funds were
received?
You can choose one of two options when determining the 24-week forgiveness period, which is discussed as the
“covered period.” Both are based on the date you received your PPP loan funds.
Covered Period: 24-week period beginning on the first disbursement date of loan proceeds.
Alternative Covered Period: For administrative convenience, if you have a biweekly (or more frequent) payroll schedule,
you can calculate eligible payroll costs using the 24-week period that begins on the first day of their first pay period
following date you received the funds. For example, if you received funding on April 20
th
and the first day of the first
payroll period after funding is April 26
th
, you could select the Alternative Covered Period which would begin April
26
th
and align with your payroll cycle. This is a convenient way for the covered period to align with payroll periods more
closely.
Frequently Asked Questions
Forgiveness Calculation
20
Can I apply for forgiveness before the 24-week period after my loan was received if I have all necessary documentation?
Yes, there are no restrictions on when you can apply for forgiveness.
At this point Lenders do not yet have direction from the SBA on how to submit a forgiveness application or what the
approval process will look like
How long after the 24-week period do I have to apply and submit my documentation? When will I know if my loan is
forgiven?
SBA has not yet provided a deadline on when forgiveness applications must be submitted. However, once you submit a
complete forgiveness application to your lender. They have 60 days to review and submit it to the SBA. Thereafter, the
SBA has 90 days to review the application and make a final determination on loan forgiveness.
Frequently Asked Questions
Forgiveness Calculation
21
How are full-time equivalent employees calculated for loan forgiveness?
There are two ways to calculate the number of full-time equivalent employees (FTEs). You can use either method,
but you must be consistent in using one method for all calculations.
Traditional: To use this calculation, divide the average number of hours worked per week by 40. Some
nuances: an employee cannot count as more than one FTE and employees who work fewer than 40 hours
per week are aggregated
For instance, if there are five employees in a company and they work 50, 40, 30, 20, and 10 hours each,
respectively, this would equal 3.5 FTEs. The calculation results in the following:
Employee averaging 50 hours = 1.0 FTE
Employee averaging 40 hours = 1.0 FTE
Employee averaging 30 hours = 0.75 FTE
Employee averaging 20 hours = 0.5 FTE
Employee averaging 10 hours = 0.25 FTE
TOTAL = 3.5 FTEs
Frequently Asked Questions
Forgiveness Calculation
22
Simplified: With this method, there are only two values to each employee – 1.0 for employees who
work 40 hours or more per week and 0.5 for employees who work fewer than 40 hours per week.
For example, if there are four employees in a company and they work 50 hours, 40 hours, 30 hours, and
20 hours, this would equate to 3.0 FTEs.
Employee averaging 50 hours = 1.0 FTE
Employee averaging 40 hours = 1.0 FTE
Employee averaging 30 hours = 0.5 FTE
Employee averaging 20 hours = 0.5 FTE
TOTAL = 3.0 FTEs
Per the SBA final interim rule on the matter:
Average FTE: This calculates the average full-time equivalency (FTE) during the Covered Period or the Alternative Payroll
Covered Period. For each employee, enter the average number of hours paid per week, divide by 40, and round the total
to the nearest tenth. The maximum for each employee is capped at 1.0. A simplified method that assigns a 1.0 for
employees who work 40 hours or more per week and 0.5 for employees who work fewer hours may be used at the
election of the Borrower.
Frequently Asked Questions
Forgiveness Calculation
23
What happens if my number of full-time equivalent employees is different than the “head count” listed on
the original PPP loan application?
The figure included in your application is not relevant when calculating loan forgiveness. The number was
only used to determine eligibility.
Can a new hire count towards eligible payroll costs and my FTE calculation for loan forgiveness?
Yes, you can include all employees who were employed at any point during the covered or alternative
covered period if their principal place of residence is the United States.
Can I increase pay rates for my employees and/or provide bonuses to count towards loan forgiveness?
Yes, increased salaries and/or bonuses can be paid to employees. However the maximum forgiveness that
can be allocated to any single employee is $15,385 (eight weeks of pay for an employee earning $100,000)
QUESTIONS AND ANSWERS
• Please submit your Questions using the Q&A Button
PPP LOAN
Forgiveness:
DO’S and DON’TS
Sandy-Michael E. McDonald, Director
Office of Economic and Small Business Development
PPP - Do’s and Don’t
What to DO…
• Have clear knowledge of eligible expenses.
• Be aware! Rules are constantly changing. Know the
rules.
• Assemble required documentation and begin your
forgiveness application immediately.
• Keep all information in a separate location.
• If you have a CPA use them to prepare and submit
the application.
• If you have employees, delegate the assembling and
maintaining of information and weekly reporting on
the forgiveness application progress.
PPP - Do’s and Don’t
What NOT to DO…
• DON’T wait until the last minute to begin
your application.
• DON’T wait until the last minute to contact
your lender to submit your
application/documentation.
• DON’T omit any required supporting
documentation
• DON’T fail to respond to any questions on
the application.
Ineligible Uses of the
PPP Loan
• Dividends and bonuses
• Disbursements to owners, etc. except when
directly related to performance of services
• Repayment of stockholder/principal loans,
except when the funds were injected on an
interim basis because of the disaster and non-
repayment would cause undue hardship to the
stockholder/principal
• Expansion of facilities or acquisition of fixed
assets
• Repair or replacement of physical damages
Ineligible Uses of the PPP Loan (continued)
• Refinancing long term debt
• Paying down (including regular installment
payments) or paying off loans provided, or
owned by another Federal agency (including
SBA) or a Small Business Investment
Company
• Payment of any part of a direct Federal
debt, (including SBA loans) except IRS
obligations
• Relocation
• Other ineligible uses available online.
How Can EIDL
Funds Be Used
FIXED DEBTS (RENT, ETC.) PAYROLL
ACCOUNTS PAYABLE
SOME BILLS THAT COULD
HAVE BEEN PAID HAD THE
DISASTER NOT OCCURRED
Taking Advantage of EIDL
• There is no cost to apply
• There is no obligation to take the loan, if
offered
• The maximum unsecured loan amount is
$25,000; secured up to $2 million
• Interest rates
• Small Businesses 3.75 %
• Most Private, Non-Profits 2.75 %
• Terms up to 30 years
• Long-term repayment will be key
Sustaining Your Business
Consider Your Future Business Model
• Pivoting
• Diversifying
• Reducing
Still Need PPP Funding…
Contact Us
The following SBA Lenders are still accepting PPP applications for the 2
nd
round
Jeni K Chokron, Sr. Relationship Manager, SVP
First Horizon Bank
Broward Team Lead
Commercial Banking
jchokron@firsthorizon.com
1000 S. Pine Island Rd. Ste 430
Plantation, Florida 33324
Oseremi Adekoye, Assistant Director
National Development Council
One Battery Park Plaza
24 Whitehall Street, Suite 710
New York, NY 10004
Oadekoye@ndconline.org
(929) 305-8209
Legacy Bank
ppploans@legacybankfl.com
Professional Bank
https://myprobank.com/cares/
QUESTIONS AND ANSWERS
• Please submit your Questions using the Q&A Button
