Welcome to our webinar!My name is Emily, and I’ll be leading today’s session.
We’ll wait a few minutes for registered attendees to join.
We also host a Q&A following the session. While we wait for the rest to join, you can fill out your Q&A form (bottom middle
of your screen) with a question you’d like answered.
The PPP and ForgivenessEverything You Need to Know as of May 6th, 2020
Snapshot: The Funding Landscape
Webinar | The PPP and Forgiveness
Clarity
Government funding● Applications for the EIDL are open solely for Agriculture
businesses, PPP applications for the second round are open
● The EIDL had $17b of funds to offer and over $370b in applications
● Applications for the PPP were opened April 27th with approximately $129b left
● $60b has been allocated solely to just community banks
● POTUS has proposed a payroll tax holiday which is currently being debated in comparison to refunding the PPP.
Private funding● Private funding options exist, but the
specifics vary across providers
● Loan terms will be less flexible and have higher interest rates
● We consider this to be more prevalent in the future. We will update when we have more information.
Focus for today
Webinar | The PPP and Forgiveness
● A bill for new coronavirus aid was passed on April 23rd, 2020 and signed on April 24th
● Some larger companies that have applied for the PPP may be reprimanded for taking PPP funds and will possibly give back
○ $2 billion was returned from the first round
● Included in this next round of funding is:○ $310B for the SBA Paycheck Protection Program○ $60B for the EIDL
● PPP funds are available now
Snapshot: The Funding LandscapeClarity
● You have an opportunity to have the entirety of the PPP loan forgiven if you follow the guidelines set out by the SBA. But how does forgiveness work?
● This means the liability will be waived and you will not be required to pay back the forgiven portion of the funds
● You do not need to pay:○ The forgiven portion of loan itself○ Any interest○ Any fees○ Any taxes on the loan amount
● This essentially makes the loan free money akin to a grant so long as it used for the qualified expenses as outlined by the SBA
Webinar | The PPP and Forgiveness
What is loan forgiveness?Guidance
● Once the funds from the PPP have been dispersed, the 8 week period of forgiveness will begin
● To recap, here are the expense types that are eligible for forgiveness:○ Payroll○ Mortgage interest○ Rent ○ Utilities
● Forgiveness for the PPP follows a 75/25 rule○ At least 75% of your loan must be used for payroll costs ○ 25% or less of the loan can be used for operational costs ○ Payments to independent contractors cannot be included in the payroll costs
● Let’s look into what falls under these expense types and what documentation will be required to apply for forgiveness
Webinar | The PPP and Forgiveness
Forgiveness and the PPPGuidance
● Included in payroll costs are:○ Salary & wages ○ Vacation, parental, family, medical, or sick leave, ○ Group health benefits
● Payroll documentation will need to be provided that covers the totals on the above costs for the payroll periods covered in the 8 week period.
○ This documentation should be provided to you via your payroll provider○ We will cover how forgiveness applies to self-employed individuals without payroll
later in the presentation
● For payroll expenses to be eligible for forgiveness, certain requirements must be met depending on the numbers on your application:
○ You must maintain the number of employees on your payroll.○ You must maintain at least 75% of total salary.
Webinar | The PPP and Forgiveness
PayrollGuidance
● Determine your FTE employee count for the 8 weeks (A)
● Determine your FTE employee count for:○ February 15, 2019 to June 30, 2019 (B1)○ January 1, 2020 to February 29, 2020 (B2)
● Take the larger of A/B1 and A/B2, if that number is less than 1, your PPP forgiveness eligibility will decrease proportionately
○ If you are a seasonal employer, you must use the number obtained by B1
● Let’s look at an example with actual numbers
Webinar | The PPP and Forgiveness
Maintaining headcountGuidance
● For example, if you will have 8 employees for the eight weeks, but had 10 employed for February 15, 2019 to June 30, 2019 and 12 for January 1, 2020 to February 29, 2020…
○ A/B1 = 8/10 = 0.80 (80%)○ A/B2 = 8/12 = 0.75 (75%)○ In this example, the business would only be eligible for forgiveness on 80% of the
total forgivable amount because the workforce has been decreased
Webinar | The PPP and Forgiveness
Maintaining headcountGuidance
Forgiveness periodA
Feb 15—Jun 30B1
Jan 1—Feb 29B2
8 10 12
Webinar | The PPP and Forgiveness
Maintaining payrollGuidance
● This will be individually assessed for each employee that did not receive more than $100,000 annualized pay in 2019 to ensure payroll is being maintained across all individuals, not just in aggregate
● If an employee’s pay over the 8 weeks is less than 75% of the pay they received during the most recent quarter in which they were employed, the eligible amount for forgiveness will be reduced
● The reduction will be by the difference between their current pay and 75% of the original pay
Webinar | The PPP and Forgiveness
Grace periods and exemptionsGuidance
● You have until June 30 to bring your staff headcount and/or pay to original levels without penalty
● If you offer to rehire a laid-off employee but they refuse, it will not affect the headcount condition
○ To qualify for this exemption:■ You must have made a good faith offer in writing■ The offer must have been for the same position, pay rate, and hours■ The rejection must be documented
○ Payroll reports will provide you with info on (1) wages, (2) group benefits, and (3) taxes
○ Payroll tax filings (Form 941) will verify (3) was paid
○ Receipts for Income, payroll, and unemployment insurance filings from your state in (3)
○ Documents verifying any retirement and health insurance contributions in (2)
● You will be required to provide documents verifying the number of full-time equivalent employees on payroll and their pay rates, for the periods used to verify you met the staffing and pay requirements:
Webinar | The PPP and Forgiveness
Payroll documentationDocumentation
Webinar | The PPP and Forgiveness
IRS Form 941Documentation
● Quarterly filing of Federal Taxes for employees
● You should be providing one form 941 to verify that the Federal Taxes were paid in that 8 week period
Webinar | The PPP and Forgiveness
Mortgage interestDocumentation
● If your mortgage was in place before February 15th, 2020, the interest portion of these payments are eligible for forgiveness
● All mortgage statements should have the highlighted section that shows a breakdown of the payment due
● Escrow and principal portions are not eligible for forgiveness
● Keep these statements for when you file for forgiveness to verify the amounts that were interest only
Webinar | The PPP and Forgiveness
Rent/LeaseDocumentation
● As with mortgages, the agreement must have been in place prior to February 15th, 2020
● A rent or lease agreement should be presented when applying for forgiveness so they can verify
○ The cost of the rent○ That it’s in the business name○ When the agreement was signed
Webinar | The PPP and Forgiveness
UtilitiesDocumentation
● Included in utilities:○ Water○ Gas○ Energy○ Phone○ Internet
● Collect bills for each payment made in the 8 weeks for when applying for forgiveness
● You should have a bill that corresponds with each amount paid in that period
Webinar | The PPP and Forgiveness
Forgiveness when self-employedGuidance
● As a Sole Proprietor, you are entitled to a portion of the loan amount to make up for lost profits
● The amount you are eligible for forgiveness on would be the percentage of your reported net income that would have occurred in that eight week period
○ To calculate this amount, take your Net Income from line 31 of your Schedule C and multiple it by 8/52 (approximately 0.15385)
● The remaining funds can still be used for mortgage, rent, lease, and utilities, only if these were eligible as deductible expenses in 2019
○ If you did not include rent, lease, mortgage interest, or utilities on your Schedule C in 2019, these expenses will not be eligible for forgiveness for your PPP
Remaining fundsGuidance
● If you do not have eligible expenses for the remaining portion of the PPP and cannot use the entirety of the loan amount, what can you do?
● You have the option of paying back the remaining balance at no penalty○ After you’ve applied for forgiveness and have received confirmation on the amount
you will be forgiven on, you can pay back the remainder of the loan at no penalty
● Payments for the loan are deferred for 6 months which makes the loan a viable, low interest option for sustaining eligible expenses beyond the 8 weeks
○ In your application, you will have stated that the PPP funds will only be used for eligible expenses (payroll, rent, lease, mortgage, utilities)
○ If you are going to use the PPP as a low interest loan, continue only using loan funds for the outlined expenses even if they will not be eligible for forgiveness
○ The SBA can penalize you with fines and even charge you with fraud if PPP funds are knowingly used for expenses not outlined in law
Webinar | The PPP and Forgiveness
Webinar | The PPP and Forgiveness
Working with BenchAction
● Your bookkeeper can work with you to ensure you are getting the most value out of our services once you receive funding from the PPP
● We can provide:○ Insight into what of your expenses will be eligible for forgiveness○ Provide you with up to date reporting on what your funds have been used on○ Collect your documents in a single place for reference when applying
● Here are some tips to get the most out of your Bench account
Webinar | The PPP and Forgiveness
Document collectionAction
● Your Bench account comes with a page that you can upload documents to● An email of receipts+[businessname]@bench.co will also forward documents here● You can keep all documents here or request your bookkeeper move them to a specific
folder for safekeeping
Webinar | The PPP and Forgiveness
Using your Income StatementAction
● Your Income Statement can be customized to show any date range
● Set the Start as the day the funds were disbursed and the End as 8 weeks out
● Review Payroll Expense - Salary & Wage, Payroll Expense - Payroll Tax, Rent or Lease Expense, and Facility & Utilities to get immediate insight to how much has been spent on expenses eligible for forgiveness
Webinar | The PPP and Forgiveness
What if you are not approved for forgiveness?Guidance
● Some lenders may follow up with a chance to provide additional documentation or make the argument for your expenses to be eligible for forgiveness
● In the case that you are denied for forgiveness on the entirety or part of the loan, the outstanding balance can be paid back immediately at no penalty or interest
● The loan can be held onto and used for the eligible expenses at just 1% interest
● These funds will still need to be used for the outlined expenses for no penalty to be incurred
Questions
We’ll pause for a few minutes for more questions to be added before jumping in!
What’s Next? Join us Wednesdays 11 AM PDT for our Webinar and Q&A period
Visit our FAQ page where we’ll put our most up-to-date information: bench.co/blog/resources/client-financial-relief-faq
Check out our blog for updated resources on all things COVID Relief:https://bench.co/blog/
We’re here to keep you informed, and to help protect your business