UPDATES on PPP FORGIVENESS & EID LOANS

PAYROLL PROTECTION PROGRAM

Great News! The PPP Forgiveness has changed thanks to the PP Flexibility Act that passed into law last Friday.

We’ve been boggled with calculations previously, and now it is all much simpler.

Here are the revised Guidelines:

• 24 weeks to use the funds instead of 8.
• until Dec 31 to return to Feb 15 headcount, instead of by June 30.
• use 60% on payroll and 40% on Rent & Utilities, instead of the 75%/25% split.
• 10 months to file for forgiveness instead of 60 days, which allows for that Dec 31 back to normal headcount. 
• if a portion is not forgiven, the loan is a 1% interest rate for a 5 year term, instead of 2 years.

Exemptions for Headcount Reduction:

If you can’t maintain or return to Feb 15 headcount, reduction is forgiven if:

• Return to prior headcount by Dec 31, 2020
• Written offer to rehire in good faith given to employee, but employee declined
• Employees terminated with cause
• Employees who voluntarily resigned

ECONOMIC INJURY DISASTER LOAN

We are seeing an average of $150,000 offered to business owners for the SBA Economic Injury Disaster Loan. When you applied for the EIDL this loan is what the application was for, and the Advance Grant of $1k per Individual/Employee was a separate check box in that application. 

The Advance Grant has been directly deposited to accounts without having to sign anything. If you received the PPP, then this amount in turn is deducted from the PPP Forgiveness. You can’t use both; well, you can, but that portion will be converted to a Loan, or you can just give it back when you apply for forgiveness. 

The SBA is now delivering the EIDLoan portion of the application. If you don’t need it, don’t accept it. This is a Federal Loan, with specific uses regarding Economic Injury during Covid-19 for the purpose of helping businesses survive during this Pandemic. This is NOT for business growth or existing debt payoff, reduction or consolidation.

Anything under $25k is Federally backed, but anything over 25k is a traditional loan with the US Treasury and requires your business / personal collateral; although, it does not change the use restrictions. 

You can use the EIDL for operating expenses through Dec 31, 2020, if your business has incurred an economic hardship due to Covid-19. 

EIDL Eligible and Ineligible Uses of Proceeds:

ELIGIBLE USES
•           Any type of working capital
•           Pay expenses:  Rent, utility
•           Pay fixed debt payments including SBA loans
•           Pay bridge loans (short term!)
•           Pay entire amount of short term debt due
•           Pay off credit cards and other financing if original purpose was related to COVID-19
•           Payments on IRS Obligations (SBA prefers you request a deferral of the monthly payment from IRS)

INELIGIBLE USES
•           Paying Bonuses
•           Distributions to owner (except typical in lieu of salary type)
•           Cannot repay stockholder loans
•           Purchase Fixed Assets
•           Expand business
•           Make repairs
•           Debt Refinance of long term debts
•           May not pay off debts with EIDL financing
•           May not pay any part of a direct federal debt

NOTES

What do Utilities include: Covered Utility payments are defined to consist of electricity, gas, water, transportation, telephone or internet access for the business.

For Income Taxes:  Please note that Grant (forgiven) amounts do not count as income AND expenses forgiven cannot be counted as expenses to offset income.

KEEP YOUR RECORDS: 
Keep all documentation, such as bank statements, payroll documents, email communication about loan and with employees, etc etc for at least 6 years. The SBA has the right to Audit the use of these funds for 6 years. 

Click here to view the Bill!