PPP Loan Flexibility Planning Opportunities

The new loan flexibility act raises even more questions that we had before. We are expecting additional guidance in the form of answers to frequently asked questions from the SBA. But until those come out, let me field a few questions that I have been asked and talk about some additional planning opportunities.
Question – When talking about the concept of Full Time Employees (FTE’s) and their potential reduction in loan forgiveness, how do we figure in non-hourly employees such as those paid by the job or by the piece?
Answer – At this point, there is no answer. Nothing that I have found either in the act itself or in any of the professional interpretations begins to approach this question. What happens if you have commissioned salespeople? Does it matter if you have no idea how many hours they actually work? What if your people are paid by the job, no matter how long it takes them to complete the job?
These are all good questions, that we hope will get answered before we start doing the forgiveness applications.
Question – Should I change my Loan Forgiveness Period from 8 to 24 weeks?
Answer – It depends. This is one of those planning opportunities that we should discuss.
From a practicality standpoint, if you have or are going to fully cover your payroll requirement in the first eight weeks, then why change?
If you will not cover your requirements and plan on hiring more FTE’s inside the following 24 weeks, then let’s use the alternative period. This is a planning opportunity for most of the Entrepreneurs who have been fully or partially shut down. This gives you a lot more time to get your payroll requirement handled.
Question – I received my loan the first week of May based upon 10 FTE’s. I hired back all of my employees even though I only really need three of them because I wanted to use the money as I had been instructed. But now I can utilize the 24 week alternative. Should I keep the additional 7 people on or can I furlough them and conserve my cash?
Answer – Stick with your instinct and conserve your cash. None of us have any idea how long this nightmare is going to continue. You may end up really needing the additional funds. We can easily elect the 24 week period, or potentially use any of the safe harbor’s inside the old or new acts to preserve forgiveness.
Question. We are getting a lot of questions on what can actually be included inside either the 75/25 or the 60/40 split. There are some newer developments in interpreting the law. So what can be included?
– Payroll Costs including salaries, wages, and commissions below $100,000 as long as these payments are included on a W-2. Also included in payroll costs are healthcare and retirement benefits.
– Exclusions include payments to Independent Contractors. You can’t include your payments to Accounting Solutions Ltd. or other Independent Contractors inside your payroll.
– Unresolved issues include payments to dental plans, vision plans, or HSA’s.
Operating Expenses include
– Rent
– Interest but principal or additional escrow payments included in your mortgage payment
– Only Mortgage obligations are included – not other credit facilities
– Utilities including electric, gas, water, telephone and internet access
– The act also talks about transportation as being an includable utility. We are yet to receive any further guidance as to what this actually means or what can be included.
For further help with your PPP Loan Forgiveness Applications, please go to the following link and fill out the form inside the sign up now button.
Let me leave you with this one thought…
I realize that this is an incredibly confusing time for all of us, especially if you operate a business inside the State of illinois. Very few states are dealing with any major restrictions. Inside Chicago, it’s even worse.
The rules on all of this stuff has become a lot like the weather. If you wait five minutes, it will change.
I have had several distressing calls from entrepreneurs even more seasoned than me expressing your frustrations. Don’t tease yourself. I get how confusing and ridiculous all of this is.
You may not have thought about before, but what we are dealing with is the largest public works project ever created. But this isn’t like The New Deal or The WPA. This is one where they are giving us the money and expecting us to administer it no matter how insane the process becomes.
Think about it. Okay. We’re going to shut down your businesses. But we will also lend you the money necessary to keep your business open if you maintain your payrolls for eight weeks. Nope. Sorry I meant twenty-four weeks. Nope. Sorry. If you just hire all of your people back by June 30th, then you don’t have to pay us back. Nope. Sorry. Now we want you to just hire all of your people back by New Years Eve.
And every time they change the rules they say that they are simplifying things.
We all need to get used to operating our businesses in a rather horrifying state of confusion. Keep your head screwed on straight. Maintain your sanity. Don’t just lose it.
We’re here to help. Know that we are right there with you every step of the way.
Accounting Solutions Ltd. stands ready to complete its mission and purpose of protecting you, your family, and your business. If there is anything that you need, whether you are a current client or not, please contact us. I’m here and I remain,
Sincerely yours,
Chris Amundson
Accounting Solutions Ltd.
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