Many of our customers have applied and received the CARES Act Payroll Protection Program Loan. Using these funds comes with strings attached IF you want the grant forgiveness. This is NOT automatic. You WILL need to make a secondary application through your financial institution who provided the loan to you for this forgiveness relief. How you might ask? What a great question. As of today,… we don’t exactly know what that process is going to entail or look like. While I’m not a betting man, I am 100% confident that forgiveness will only be provided to those with a great deal of documentation proving they used the funds according to the “rules”. I say “rules” because all we currently know today about getting the grant forgiveness relief is:
1. PPP Loan proceeds must be used 75% on payroll and payroll related costs as defined and the remaining 25% used for rent/mortgage interest and/or utilities.
2. Assuming you pass the 75% payroll cost test, you must pass the Full-Time Equivalent (FTE) Employee test…. and we do not know if the denominator will be 30, 40 or x number of hours.
3. Again assuming you’ve passed the 75% test you must also pass the 75% test of pay rate to employees. This means that you may not pay an employee less than 75% of what he/she was previously making…. What about new employees that have nothing to compare against? Not a clue – its not defined.
There are other conditions and strings attached to this loan program. You’re being asked to accept loan proceeds that might be forgiven in a grant process that has no guidance or forms (at this time). How do you cover your proverbial behind,…. document every one of your decisions and actions and be sure to ensure you are complying with the rules as we know them at this time and as they might change…. Use your base period as your benchmark. Know how many FTE employees you have. Know the average hourly rate and weekly hours for your FTE employees. Document what you have paid during the eight weeks of the PPP Loan time frame.
The last thing you’ll want is a loan….. If you aren’t sure, contact us. If you aren’t a current customer…. contact us. We’re here to help.