PPP Loan Update Important Notices This webinar is
PPP Loan Update
Important Notices This webinar is provided as a general information service to Partners and clients of Acrisure, LLC. It should not be construed as, and does not constitute, legal advice on any specific matter. Information on the response to COVID-19 is changing frequently, sometimes daily. If you are watching this webinar as a recording after the original recording date, please visit the SBA and U. S. Treasury websites for the most up to date information and guidance. 2
Hector Barreto In July 2001, Hector Barreto was unanimously confirmed by the U. S. Senate as the 21 st administrator of the U. S. Small Business Administration. In this capacity, he oversaw the delivery of financial and business development tools to Americas entrepreneurs. Barreto has received special recognition for his contributions to Americas small -business community from the U. S. Congress, the California Legislature, the American Heart Association and the American Red Cross. Recognized by Hispanic Business magazine as one of Americas 100 Most Influential Hispanics, Barreto has also been praised by the Latino Coalition for being a role model to Latino youth, and the Hispanic College Fund has commended his leadership in advancing Hispanic businesses. 3
PPP Purpose Congress intended to provide financial incentive to eligible small businesses to retain employees by providing resources necessary to supplement employee compensation, including self-employed individuals. 4
PPP Recap • Qualified small business can borrow up to the lesser of: – 2. 5 times of average monthly payroll costs, or – $10 million • Loan Term – 2 year 5 years, 1%, but eligible forgiveness when used for payroll and other allowable expenses 5
PPP Recap • Eligible for loan forgiveness (i. e. does not have to repaid) IF 75% 60% or more of loan proceeds used to maintain full-time equivalent staff on payroll, with no more than 25% 40% or less for other allowable operating expenses. 6
Loan Forgiveness WHAT YOU NEED TO KNOW
Expenses eligible for loan forgiveness 75% 60% or More: • Payroll costs –Salaries, wages, commissions, or tips – $100, 000 max per employee—gross earnings 25% 40% or Less: • Interest on mortgages – loans incurred before February 15, 2020 • Commercial Property Rent – lease agreements executed before February 15, 2020 • Utilities – lease agreements executed before February 15, 2020 8
Qualified payroll Cash compensation –includes gross salary, wages, gross tips, gross commissions, overtime, paid leave (excludes FFCRA leave), allowance for dismissal or separation and bonuses. • The total for each individual employee may not exceed $15, 385 for the covered period ($100, 000 pro-rated) • Any amounts paid to owners (owner-employees, a self-employed individual, or general partners) are capped at $15, 385 or the 8 week 24 -week equivalent of their applicable compensation in 2019, whichever is lower. 9
Qualified payroll Other payroll costs: employer contributions for employee health insurance, including employer contributions to an employer –sponsored group health plans, including dental & vision; employer contributions to employee retirement plans; and employer state and local payroll taxes. * Workers compensation and federal taxes are NOT included. 10
Inclusion of personal & real property • Personal property items, such as copiers, servers, autos, and other common items of personal property that are leased by the business can be included in non-payroll costs that may be forgiven • Similarly, interest paid on real and personal property, including equipment, autos, etc. can be forgiven. 11
Time period flexibility for payroll • Covered period: Starts when lender makes first PPP loan disbursement. From that date, you have 8 -weeks 24 weeks to make eligible payments • New alternative period: Borrowers may now opt to begin their period on the first day of their first pay period after receiving first loan disbursement 12
Forgiveness tied to having same # of FTEs Keep Your Employee Headcount Up • The amount eligible forgiveness will be reduced if the borrower decreases its FTEs • The reduction percentage is determined by: – Average number of FTEs during the covered period divided by either: Ø February 15, 2019 –June 30, 2019 (seasonal businesses must use this); or Ø January 1, 2020 –February 29, 2020 – Borrower (except seasonal) may choose which to use 13
Exceptions for FTE reductions SBA will now allow for exceptions in workforce reductions for: • An employee who was fired for cause • An employee who voluntarily resigned • An employee who voluntarily requested and received a reduction in hours • An employees who declined a rehire offer • Documentation Key –written, not verbal communication • Only allowed to claim this individual if position was not filled by new employee 14
FTE Safe Harbor • If you laid off or furloughed employees, you must bring them back on payroll so your headcount reflects what it was when you applied for the loan. • If you decreased your # of FTEs between February 15, 2020 – April 26, 2020 you can qualify for FTE Reduction Safe Harbor if you restore levels by June 30, 2020 December 31, 2020 15
Forgiveness tied to maintaining same wages • For the covered period, you need to pay employees at least 75% of their average wage rate from January 1 – March 31 • Any amount of wages reduced in excess of 25% per employee will not be forgiven • You have until June 30, 2020 December 31, 2020 to eliminate reductions in excess of 25% 16
Owner employees, self-employed payroll cap • There’s a limitation on owner employees and self-employed payroll forgiveness • Lesser of $15, 385 or the 8 -week 24 -week equivalent of their 2019 compensation • Non-cash compensation for owners is excluded (effectively removing health insurance, retirement benefits, and employer paid state and local unemployment compensation taxes) • Updated guidance clarifies that self-employed cannot claim entire PPP as income replacement. 17
SBA can review any loan at any time • May 13 Treasury FAQ provides a “safe harbor” for all loans under $2 million, deeming them made in “good faith” • SBA can review all loans to determine eligibility and accurate calculations forgiveness • Borrowers must retain their PPP documents for at least six years after the date the loan is forgiven or paid in full 18
Forgiveness can take up to 5 months • Once you file an application forgiveness with your PPP lender, they will take 60 days to review and let you know forgiveness amount • Bank will then notify SBA of the amount and SBA will have 90 days to approve 19
Tips to maximize your PPP forgiveness • Remember the PPP’s purpose to preserve people’s pay during the pandemic • To maximize your potential loan forgiveness: – Make sure you’re not reducing your # of FTEs or equivalents or their wages – Make adjustments to avoid reduction penalties – Ensure what’s left over is spent only on approved overhead expenses 20
Recent legislation • As passed: – Reduced minimum amount of the loan needed to be spent on payroll to 60% from 75% – Extended the window businesses have to use the funds from 8 -weeks to 24 -weeks – Pushed back deadline to restore FTEs and Wages to December 31 st – Extended the time recipients have to pay non-forgiveness loan amount to 5 -years from 2 -years – Let borrowers receive loan forgiveness AND defer payroll taxes 21
Questions and Answers If you have additional questions, please email us at Cares. Act@Acrisure. com 22
Additional Resources • U. S. Small Business Administration – Coronavirus Relief • • U. S. Department of the Treasury – CARES Act Overview • • https: //www. uschamber. com/coronavirus America’s Small Business Development Centers • • https: //www. sbc. senate. gov/public/index. cfm/guide-to-the-cares-act U. S. Chamber of Commerce – Coronavirus Resources • • https: //home. treasury. gov/policy-issues/cares U. S. Senate Committee on Small Business & Entrepreneurship • • https: //www. sba. gov/funding-programs/loans/coronavirus-relief-options https: //americassbdc. org/ SCORE, the nation’s largest network of volunteer, expert business mentors • www. score. org 23
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