Now that you got the PPP money what do you do?

PPP Loan Forgiveness

This is based on an email prepared by Jeff “Happy Day” Pasternack, CFP®

Happy day,

Please put your phone on silent, place it in the other room and pay attention.  This email requires just a few minutes of your time.  We gleefully sweated through the process of putting together your Paycheck Protection Program application, and now that you have the money, the next step is underway.

How should you prepare?

  • If we’re doing your monthly books, you don’t need to do too much.  We’ll be capping your monthly wage at the maximum allowable $8,333.33 and the rest will be settled through rent, a wide variety of expenses identified as utilities, and if necessary, a pre-payment to your retirement plan.  Did you read that last bit?  A pre-payment to your retirement plan.  It will likely be just a few thousand dollars, but it sure beats putting a spouse on payroll and paying more payroll taxes if you can swing it.  But the way I’m looking at it is that you have the cash, so I don’t want to hear about it. ?
  • If we don’t do your monthly books, then you are expected to document your expenses, both payroll costs and others, in the 8 weeks after the loan disbursement date (even if that starts or end on a weekend) – when loan funds were deposited into your business checking account. You can see your loan disbursement date on your business checking account statement and your transaction history. To be on the safe side, I would make sure that the last funds are spent and clear the bank prior to the end of the eight weeks.

Some key factors that may affect your loan forgiveness:

  • Generally, you must maintain employee headcount during the eight-week period after loan disbursement, as compared to employee headcount during either:
    • February 15, 2019 through June 30, 2019 or
    • January 1, 2020 through February 29, 2020
  • In addition, you must also maintain total salary and wages for each employee at certain levels compared to the most recent quarter during which the employee was employed prior to receiving the loan.
  • At least 75% of loan proceeds must be used for payroll costs, as defined by the SBA.
  • No more than 25% of the loan forgiveness amount may be for eligible non-payroll costs, like mortgage interest, rent payments, and utility payments(including expenses such as internet & cell phone costs).
  • Please remember my unofficial 80% rule. If you think about it you were given 10 weeks of payroll. You are required pay people the same as they were being paid before. Thus, except for certain reasons and therefore the 75% number, you need to pay 8/10 weeks or 80% to your employees.

How will you request forgiveness through your lender?

  • You will likely be sent an email letting you know when you can request loan forgiveness online.  I suspect that to be in July as payroll returns will be complete.
  • We will work with you to certify and document that you used the loan funds for SBA-eligible purposes.
  • Your lender will review your request and send it to the SBA for a decision.
  • You’ll probably be able to check your loan forgiveness status online – we aren’t sure yet how long the SBA and/or your lender will need to make a decision.
  • Once the SBA makes a decision, your lender will email you. It should be noted that this decision may be very lender driven.

Here is what we don’t know:

  • The process for partners and Schedule C-filers.  I repeat…I don’t yet know what the process is.
  • What each lender will ultimately require.
  • The format of the documentation and the process for uploading it.

In the famous words of Forrest Gump….that’s about all I have to say about that.

  • Jeff “Happy Day” Pasternack, CFP®
  • Managing Partner
  • Pasternack Associates, LLC
  • 1200 NW 17th Ave Suite 19
  • Delray Beach, FL 33445-2513
  • Tel.  561-235-2829 Ext. 8
  • Cell  561-441-7812
  • Fax  866-955-6669