Nearly two weeks into the second round of funding for The Payroll Protection Program Loan, 39% of the additional funds are still available. The initial $350B in funding was depleted inside the first two weeks of applications. Many expected that the second round would be depleted just as fast.
But demand for the second round has been significantly lighter. Only $189B of the $310B of funding has been approved and allocated. There could be many reasons for this slower pace, but most of it is probably due to a lack of understanding of the program. I have tried to help you to sort out most of the confusion on this ever-changing landscape of rules and lending.
But the point is that if you have not applied for this forgivable loan, please do so today. If you don’t have everything that you need for the application, whether you are a current client or not, please contact our offices today. We can help.
The following is a list of the larger PPP Lenders, their requirements, and whether or not they are still accepting applications for The PPP Loan Program.
Many of you are telling us that you are continuing to have difficulties with your lenders. Why? Think about it. If you were a lender and the government was asking you to lend out money at 1% that could be completely forgiven, how much money do you think that you could make off of a bunch of loans like that? Probably not that much. Would you be in a hurry to hire an extra twenty people to process those applications? Of course not.
So if you are having problems with your traditional lender, go find another one and get it done.
We’re getting a lot of additional questions about PPP Loan Forgiveness, so let me try to field a few of those questions…
I have Salaried, Full-Time, Commision Only, and Part-Time Employees. Given the fact that PPP Loan Forgiveness can be reduced by my head count of Full Time Employees, what is the actual definition of a Full Time Employee (FTE).
No one knows. The CARES Act refers to Full Time Employees at least 10 times, but does not provide a definition. We are waiting on a clarification in a findings letter from The SBA. Stay tuned…
Do I need to hire back the same employees that I laid off in order to receive PPP Loan Forgiveness?
No. You do not. They are looking for a head count of FTE’s, whatever that definition actually becomes in the anticipated SBA Findings Letter. It doesn’t matter who those heads happen to belong to in order to qualify for PPP Loan Forgiveness.
Please also note that if you ask one of your employees to return, and they choose not to, then that employee can be eliminated from your FTE Requirement on PPP Loan Forgiveness. Also, that information should be provided to your Unemployment Department to reduce your exposure on any potential increase in the Unemployment Percentage for next year.
Do I need to rehire people for the same positions doing the same jobs as before I laid everyone off?
No. The banks will be looking for head counts and individuals making the same amount as before. That is all. If you had a marketing person before and rehired a bricklayer, it doesn’t matter as long as your bricklayer is a full time employee being paid what your marketing person made before.
In the first quarter I had a monthly payroll of 10 employees making $50,000 per month. I now only need 5 employees with a current payroll of $25,000 per month. Can I just increase my own payroll to make up the difference and have the entire amount forgiven on the PPP Loan?
No. PPP Loan forgiveness will be based not only upon the FTE Headcount but also your payroll from the 1st Quarter. If you increase your payroll on any individual employee during the forgiveness period, by law the increase will not count for forgiveness of The PPP Loan.
In one of your columns, you talked about refinancing as a way out of any amount that is not forgiven on The PPP Loan. You talked about the large monthly payments inherent in an 18 month amortization schedule. Wouldn’t it be better to save the money for repayment or just to pay off The PPP Loan at a 1% interest rate?
Absolutely. Either solution is preferable to refinancing. But this presumes two things. First, that you don’t need the additional money that will not be forgiven. What happens if you do need it to stay open?
Second, it also presumes that you will have sufficient cash flow once this is all over to make the large monthly payments that are inherent in the PPP Loan Program to repay any amount not forgiven. Once things reopen, most businesses are going to be very slow. Most people are going to be too afraid to leave their homes to do anything like go out and buy anything in the first place.
Any financing that you receive would be at a higher interest rate but a longer amortization period so the monthly payments would be substantially lower and more affordable. If you have the cash flow then repaying the PPP Loan under its existing terms would be preferable. If not, then refi out of it for a more reasonable monthly payment.
Any of you who know me, know that I am not a big fan of debt. The easiest way to have an unprofitable business that risks being closed is to have too many debts.
But in this case, it may be the only way that you stay open.
Let me leave you with this one thought…
Every crisis is an opportunity, and every opportunity is a crisis.
I have talked about this old Chinese concept before. The written Chinese Language has hundreds of thousands of hieroglyphs, but only one that has two separate and distinct meanings. It is the symbol for crisis and opportunity. In The Chinese Mind, these concepts are one and the same.
I have never in my 29 years of Entrepreneuring even imagined a time as surreal and incomprehensible as this. If you had asked any of us a year ago whether or not it was possible for the government to shut down a significant amount of our economy and then pass out billions of free dollars so that businesses could rehire employees that they didn’t need, any of us would have laughed at the idea.
But here we are.
You need to turn this crisis into an opportunity. You can do this, and we are here to help.
Accounting Solutions Ltd stands ready to fulfill its mission to protect you, your family, and your business. If there is anything that you need, anything at all, don’t hesitate to contact us. Whether you are a current client or not, contact us today. I stand ready and remain,
Accounting Solutions Ltd.
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