PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

The Latest U.S. Treasury Guidance on PPP (Updated May 6)

By at 6 May, 2020, 9:17 am

Guidance Provided by U.S. Treasury on the Paycheck Protection Program (PPP)

New on May 6: On May 3 and May 6, additional Q&As were added to SBA/Treasury’s core guidance document, which brings the total number of questions and answers on PPP rules to forty-five.

Question #40 addresses efforts at employee retention and whether PPP loan forgiveness will be reduced “if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?”

The answer is “No,” and to qualify for the exception “the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.”

Question #41 offers additional guidance for seasonal employers regarding calculation of maximum PPP loan amounts.

Question #43 reminds borrowers to carefully review the required certification on the application form, and the safe harbor for loan repayment.

Questions #45 answers the question: “Is an employer that repays its PPP loan by the safe harbor deadline (May 14, 2020) eligible for the Employee Retention Credit?” The answer is yes.

NEW on April 24: HOW TO CALCULATE MAXIMUM PPP LOAN AMOUNTSNew guidance from the SBA in consultation with U.S. Treasury (released on the evening of April 24) will, according to the document, “assist businesses in calculating their payroll costs for purposes of determining the amount of a Paycheck Protection Program (PPP) loan businesses can apply for.”

The guidance, formatted in a Q&A format, provides information and steps for a variety of small businesses including: self-employed with no employees; self-employed with employees; documentation  business owners will provided depending on how they report their income; how partnership should apply for PPP loans; how is the maximum PPP loan amount is calculated for S corporations and C corporations; how it is calculated for eligible nonprofit organizations, nonprofit religious institutions, veterans organizations, and tribal businesses; and what other documentation can be provided for the purpose of substantiating the applied-for PPP loan amount.

NEW on April 14: Supplemental PPP Guidance (April 14): Additional Eligibility Criteria and Requirements, and Calculating Self-Employment Income

On April 14, the U.S. Treasury and Small Business Administration issued supplemental guidance on several issues, including clarification for the self-employed regarding the calculation of net income and payroll for Paycheck Protection Program (PPP) loans and related guidance on forgivable expenses. Access the guidance here.

NEW on April 13: Guidance from the U.S. Treasury released on April 13 about the PPP in Q&A format clarifies other issues with regard to franchises, affiliation and lender responsibilities and protections.

April 8 Guidance: Another round of guidance was released on April 8, with clarification in some key areas. The guidance can be accessed in this simple Q & A document.

Hopefully this will help lenders with important questions, and in turn move PPP funds to small businesses. The guidance cleans up a few areas for small businesses and the self-employed as well.

This last piece of guidance (Question #20 on the document provided by Treasury) is going to cause heartburn for small businesses, as they would like a little more flexibility selecting and ramping up for their 8-week period:

Question: The amount of forgiveness of a PPP loan depends on the borrower’s payroll costs over an eight-week period; when does that eight-week period begin?

Answer: The eight-week period begins on the date the lender makes the first disbursement of the PPP loan to the borrower. The lender must make the first disbursement of the loan no later than ten calendar days from the date of loan approval.

SBE Council is advocating for some changes and flexibility to what is now an obsolete window and deadline in the CARES Act (June 30, 2020). This issue is included in a coalition letter organized by the Small Business Roundtable (that SBE Council president & CEO Karen Kerrigan chairs) to Congressional leaders that was sent to Capitol Hill on April 7.

Given the longer than expected stay-at-home orders by the states (June 10 in Virginia, for example) and how these state actions impact local economic activity, the PPP window is not aligned with changing economic conditions and it’s not practical for many small businesses.

 

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