For Lucky PPP Recipients, Focus Should Shift to the Forgiveness Calculations.
If you received funds, according to the Cares Act your 8-week clock started on that day you received a funding installment. In simple terms, if you use the loan to fund payroll (for employees only and at least 75% of the proceeds) or use it to pay your rent, then 8 weeks of those costs are eligible to be removed from your loan principal balance. The clear message here is that the Treasury Department wants to incentivize small businesses to continue operating during this time and are willing to go to lengths never seen before to do so. Based on the way banks calculated loan availability, we expect massive inconsistency in how each of the banks handle loan forgiveness.
So we are recommending two things:
1. Stay in constant contact with your banker. They need to know you and your business by name and you need to demand both a clear understanding of how their PPP program works and where you stand within it. You obviously can and should treat them with respect, but this may be your business’s life on the line. Make them work for you and be sure that they’re going to get you into the forgiveness process.
2. Start to gather information. It is important to gather payroll data, health care bills, 401(k) matching data, rent, and utilities. All of these can contribute to forgiveness. Here is a simple template to help you start gathering the information you will likely need for the forgiveness process.
The Payroll Protection Program has come through for some lucky companies. The questions now?
How do I Calculate PPP Loan Forgiveness?
How do I plan for the next 8 Weeks?
We dug through two main sources to get you the answers, the Cares Act and the SBA’s Interim Final Rule. Even the name interim final rule suggests that the Treasury is building the plane while we are flying in it. We can’t get caught up in that though, we have to get to the next steps.
We put together a free PPP Forgiveness Calculator to help. There are two main areas that we focus on in the calculator:
- The forgiveness percentage which is based on number of employees you still have at the end of the period
- Qualified costs – we dig in line by line on each allowable cost.
Don’t worry we kept it as simple as possible and have instructions on every page.
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