I’ve been doing regular 40-minute free zoom sessions for my clients and colleagues for a few months now, mostly centering on questions concerning PPP & EIDL applications and forgiveness.
Today we did one on the recent big changes to the PPP forgiveness program, and many have asked me for the recording, so I decided to make it public — to assist them and others out there in getting the facts (well, at least the ones we know so far).
The AICPA has come out with the best summary I’ve seen so far, which is what I chose to use in the zoom session as a reference — so if you don’t have 40 minutes handy, take a quick look at it instead (or in addition):
And of course, the inimitable Tony Nitty has gotten to the core of the issue by pointing out all the stuff we don’t know yet. His excellent analysis can be found at Forbes, as always.
More to come — hopefully soon, as I have many clients whose initial forgiveness period is about to come to a close, and we can only remain in a holding pattern for so long.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Honestly, I’m shocked. (And a little worried — but mostly pleased and shocked.)
When the House passed their extremely generous Paycheck Protection Program reform bill last week (which I affectionately termed “Relief for the Relief Program”), the Senate made it clear there was no way it would clear their chambers: “Multiple members are opposed for different reasons,” GOP Sen. John Thune of South Dakota told CNN on Tuesday, as he suggested that fast-tracking the legislation this week didn’t look likely. Every single pundit, journalist, and even my colleagues at the AICPA said there was no way such a windfall would make it past the Senate. Surprise!
Tonight it passed with an overwhelming majority, and it — mostly — will likely make forgiveness so much easier for small businesses (and the big ones who managed to get the funding despite everything, but that’s old news). We now await its signing between golf outings.
It will allow borrowers to extend the forgiveness period from eight to 24 weeks (or December 31st, whichever is shorter).
It will lower — to 60% from 75% — the minimum portion of the PPP loan that must be spent on payroll. As before, the rest must be spent on rent, utilities and other business-related expenses.
It will expand the exceptions for employers who are not able to re-hire staff due to COVID-19, and extend the safe harbor rehire date to December 31st.
It will extend the repayment period start-date for the non-forgiven portion from six months (the prior rule), to the date when SBA has processed the forgiveness application from the lender — or if the borrower doesn’t apply for forgiveness, then ten months after the last day of the covered period. This also means that you have ten months after the forgiveness period in which to apply for forgiveness.
It will extend from two to five years the time new PPP loans must be paid back (with an option for as much as ten) if the amount provided doesn’t convert into a grant. (So far this is only for PPP loans that haven’t been awarded yet, not retroactive to existing loans; but borrowers may work with lenders to amend terms if needed.)
Mostly, this is just amazing. My clients are struggling to jump through all the hoops to spend this money according to the unbelievably complex rules — ones that don’t seem to have much connection to the reality we’re facing right now, especially in the hospitality industry.
So why am I concerned? Because yesterday Marco Rubio said this: “People need to know that the way the Treasury has told us they are going to interpret that bill — if you don’t spend 60% of your money on payroll, if you only spend 59.9%, you will get zero forgiveness.”
MarketWatch reported: “There’s some issues with it that are going to cause people problems, and I just want everybody to know that ahead of time,” Florida’s senior senator also said. “I think still we’re better off passing it than not passing it.”
So of course I am concerned that it sounds like the phase-out of forgiveness that we previously had in the rules is going away. Rubio pointed out that, “procedurally, the problem is if we change the House bill, we’ve got to send it back then,” which is clearly not an option, as this is already “too little, too late”. As it is, I have clients who will not get to use this new relief, as their forgiveness periods end in a few days and they spent all the money based on the old rules — paying staff to do nothing, at a business that is still closed by law.
But for those who can benefit from it, I am thrilled. Now we await signing, and then an inevitably much longer wait for Treasury to issue necessary guidance to answer the many questions this creates.
Please note that several large companies and chains have returned their multi-million-dollar PPP loans, so there is now more than $130 billion available — for eligible nonprofits, companies, and gig workers. So please apply now if you haven’t already!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Note: I’ll continue to add to this list as the City releases more dates.
Wednesday, 6/3 at 3:00 PM Webinar Marketing Basics: What you need to know! Presented by Donna R. Rockin, Managing Partner at Rockin Enterprises, Inc. At this presentation, you’ll learn how to identify your Unique Selling Proposition (USP) as well as identify your target markets or ideal customers. The four cornerstones of marketing will also be reviewed and discussed: Product, Price, Promotion and Placement. Finally, learn 10 low-cost methods to promote your goods or services. Click hereto register for the Wednesday, 6/3 Webinar.
Friday, 6/5 at 9:30 AM Webinar COVID-19’s Impact on Employment Handbooks & Policies Going Forward Presented by Charles Krugel, a Management Side Labor, Employment and Human Resource Attorney An interactive discussion concerning the kinds of policies and practices employers will need to consider upon reopening. Click here to register for the Friday, 6/5 Webinar.
Wednesday, 6/10 at 3:00 PM Webinar Plan for A Successful Business Presented by Score Chicago A great Business Plan leads to success. A thoughtful and well-executed business plan is the first step for every potential entrepreneur. Good planning increases the odds of success. This workshop covers the essential elements of business plan development. Topics include: setting goals and objectives, preparing marketing and financial plans and defining action steps to attain appropriate goals. With a good plan, build your road map to success. • Establish the information needed for a detailed business plan. • Create the Environment of the Company • Establish Pro Forma P&L Statements • Identify the Risks • Develop the Expected Cash Flow • Prioritize Your Action Steps Click here to register for the Wednesday, 6/10 Webinar.
Friday, 6/12 at 9:30 AM Webinar Introduction to Intellectual Property, Part I Presented by Lema Khorshid, Fuksa Khorshid LLC An introductory seminar for the savvy entrepreneur who wants to learn to identify the basic forms of intellectual property and formulate an effective intellectual property strategy for his/her business. Click hereto register for the Friday, 6/12 Webinar.
Tuesday, 6/16 at 2:00 pm Webinar Labor Standards Records Requirements and Other Employer Obligations Presented by Office of Labor Standards Review of employer obligations including record requirements and notice/ posting. Click here to register for the Tuesday, 6/16 Webinar.
Wednesday, 6/17 at 3:00 PM Webinar Accounting in Quickbooks Presented by Trak Patel, ARCC Consulting Learn how to keep your financial recordkeeping books using QuickBooks. We will identify the differences between QuickBooks Online vs. QuickBooks Desktop and list the important features and benefits. Click here to register for the Wednesday, 6/17 Webinar.
Wednesday, 6/17 at 2:00 PM & Thursday 6/18 at 10:00 AM Webinars Outdoor Dining during Phase Three Presented by the Department of Business Affairs and Consumer Protection (BACP), the Chicago Department of Transportation (CDOT) and the Department of Cultural Affairs and Special Events Join this webinar for an overview of all outdoor dining options during Phase Three of Chicago’s Reopening Plan. This webinar will cover rules and guidelines for outdoor dining, including how to obtain a sidewalk café permit or the new Expanded Outdoor Dining Permit. Click here to register for the Wednesday, 6/17 2:00 pm webinar. Click here to register for the Thursday, 6/18 10:00 am webinar.
Thursday, 6/18 at 2:00 pm Webinar Anti-Retaliation Ordinance Presented by Office of Labor Standards Overview of the new Anti-Retaliation Ordinance, designed to protect workers from retaliation during COVID-19. Click hereto register for the 6/18 Webinar.
Friday, 6/19 at 9:30 AM Webinar How to Open a Concession at O’Hare and Midway International Airports Presented by the Chicago Department of Aviation – Concessions Department and Unison Retail Management Are you interested in operating a restaurant or shop at O’Hare or Midway International Airport, but don’t know where to begin? Come and learn about the Request for Proposals (RFP) process and how to operate a business at the airport. This workshop will also provide an overview of the Airport Concessions Disadvantaged Business Enterprise (ACDBE) program. Click here to register for the Friday, 6/19 Webinar.
Monday, June 22 at 10:00 AM and 1:00 PM Webinars Indoor Dining: Options for Restaurants and Bars Presented by the Chicago Department of Business Affairs and Consumer Protection The City of Chicago has announced that bars and restaurants can begin indoor service under limited capacity and strict guidelines on Friday, June 26. Join this webinar for an overview of the guidelines for bars and restaurants to reopen indoors. Click hereto register for the 6/22, 10:00 AM Webinar Click here to register for the 6/22, 1:00 PM Webinar
Phase Four Webinars While the phase four start date has not been announced, the Department of Business Affairs and Consumer Protection will be holding webinars to help all industries prepare for the phase four guidelines. Tuesday, June 23 at 9:00 AM: Hotels – click here to register Tuesday, June 23 at 10:00 AM: Personal Services – click here to register Tuesday, June 23 at 11:00 AM: Health and Fitness – click here to register Wednesday, June 24 at 9:00 AM: Arts/Performance Venues and Museums – click here to register Wednesday, June 24 at 10:00 AM: Retail – click here to register Wednesday, June 24 at 11:00 AM: Restaurants and Bars – click here to register
Wednesday, 6/24 at 3:00 PM Webinar The Power Is In Your Pivot: Series 2 Presented by ChiBizHub This webinar, is the second in a series that will convene a panel of business owners and ChiBizHub resource providers to share insight on how they’ve pivoted their businesses during COVID-19. The webinar will provide an overview and tips on how these businesses have remained relevant, gained a new customer base and skills amidst the pandemic to keep their businesses alive. Click here to register for the Wednesday, 6/24 Webinar.
Thursday, 6/25 at 10:00 AM Webinar COVID-19 Relief for Small Businesses Presented by: An SBA Illinois District Representative Join us for an update on the Small Business Administration’s programs to assist small businesses impacted by the COVID-19 pandemic, including the Economic Injury Disaster Loan Program, the Paycheck Protection Program, and more. We’ll discuss eligibility requirements, applying for forgiveness, and other sources of funding. Bring your questions! Click here to register for the Thursday, 6/25 Webinar.
Friday, 6/26 at 9:30 AM Webinar Tips & Tricks for Networking in a Pandemic World Presented by Anna Maria Viti-Welch, President of the Viti Companies Anna Maria Viti-Welch, President of The Viti Companies, will discuss strategies for building business through networking in unusual global circumstances – business might be on pause, but networking is still going strong. Bring your questions! Click here to register for the Friday, 6/26 Webinar.
To view Reopening Chicago: Retail Service, click here. To view Reopening Chicago: Food Service, click here. To view Reopening Chicago: Health and Fitness,click here. To view Reopening Chicago: Personal Services,click here. To view Overview of Chicago’s Reopening Plan for Businesses (Spanish), click here. To view Overview of Chicago’s Reopening Plan for Businesses, click here.
And get ready for the upcoming Phase 4 with Phase Four Webinars: The Department of Business Affairs and Consumer Protection is holding webinars to help all industries prepare for the Phase 4 guidelines.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
UPDATE: THIS POST IS ALMOST A YEAR OLD AND NO LONGER IS USEFUL INFORMATION.
(Way too many folks are landing on this page and I want to dissuade them from using this as a reference — there have been so many changes to the PPP since this was published. Make sure you restrict any internet searches to posts made in the past month!)
I’m getting this question a lot:
I have someone telling me that they can use all 100% of their PPP for payroll instead of the 75/25 rule of payroll/rent+utilities. Is that correct?
Yes, it is — and yes, you absolutely want to include all of your payroll costs in the forgiveness application calculations!
Some folks are in the situation whereby they have more payroll costs than 75% of the loan will cover. In fact, in some cases, the entire PPP loan — 100% — will be used on payroll costs. And that’s a good thing when it comes to requesting forgiveness, for reasons I’ll explain.
In my firm, for example, I’m paying staff tax-season rates right now, and I have a new employee as of January 2020… but my loan total was calculated based on the average of all of 2019 — so it’s much lower than my actual current payroll costs. I’ll be using 100% of my PPP funds for payroll (and then some). By including all my payroll costs in the forgiveness application and projection calculations, I don’t have to worry about going to the effort of submitting rent/mortgage interest and utilities costs (which are very low for me anyway, as my staff is entirely work-from-home).
But it’s not just a matter of having low overhead and not wanting to spend administrative effort to gather mortgage interest and utilities cost substantiation… it’s more importantly because for forgiveness, we’re all aiming to hit three important tests: the FTE reduction, wage/salary reduction, and 75% of forgiveness hurdles. These are all based on payroll measurements, so it’s best when plugging in your forecasting calculations to first include all the payroll you can… and then just make up the difference with non-payroll costs. The total forgiveness cannot exceed the loan total, so there is no harm in taking this approach.
It is, after all, a Paycheck Protection Program.
Reminder: owners themselves (be they sole proprietors, partners, or shareholder-employees) cannot have more than 8/52 of their 2019 compensation forgiven for PPP purposes, which does mean that for a business owner with no employees, they will not be able to use 100% of the funds for payroll. But for everyone else, yes!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
I’ve been doing regular 40-minute free zoom sessions for my clients for a couple months now, mostly centering on questions concerning PPP & EIDL applications and forgiveness.
1) I have taken six webinars on the new PPP forgiveness rules in the past week — and gotten six different interpretations. They vary widely, on topics such as the EIDL advance subtraction, incurred and-vs-or paid, what an acceptable utility is… as well as some flat-out mistakes (such as including owner compensation in FTE/wage reduction calculations — this is simply not okay). There was even one where the person doing the presenting and the person answering questions in chat were conflicting with each other. So keep in mind that just because someone (including me) sounds confident — this does not mean they are right. They’re just AN expert… there is currently no such thing as THE expert. Just do your best with the information you have — the smartest approach to take is to do whatever you can to make it easy for your banker to just glance at your substantiation and decide it’s sufficient to support your calculations, whatever interpretation you choose.
2) This tool is a DRAFT. For one, there are some small errors in it that I’ve reported to the AICPA; but more importantly — we know this guidance is going to change. In fact, there is pending relief legislation in Congress (to extend the forgiveness period or remove the 75% rule) that may render most of what we’re doing now useless (including the fact that we don’t yet know when we’ll be submitting anything for forgiveness).
However: some folks are more than half-way through their forgiveness period and we have to plan based on the law as it stands now… and hitting the FTE reduction, salary/wage reduction, and 75% of payroll tests is hard. So as a tool for forecasting, as well as establishing your goals and gauging your progress, I encourage you to fill this spreadsheet out to the best of your ability, so you aren’t surprised by a large loan balance at the end of this.
3) Remember, you will only fill out the sections on the application that are highlighted in BLUE. The spreadsheet bases all calculations on that data. Grey fields are calculated, and green are ones that pull from data you entered elsewhere. The instructions aren’t entirely complete, and there are a couple small errors, but it’s still the best tool I’ve found out there (including my own). The spreadsheet formula cells are locked, but you can resize any areas you need to in order to view the full content. Lastly, it seems maybe folks with Macs or using cloud spreadsheet software may have challenges getting their systems to recognize it’s not read-only.
Best of luck, and I’ll try to post other examples for other entity types as time allows.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
The Small Business Administration gets some kind of perverse joy out of releasing guidance on Friday nights. Last week, it was the new PPP loan application, and this week, it’s the guidance to accompany it.
The Journal of Accountancy did a nice job summarizing each of the new documents on Monday — I definitely recommend reading their brief write-up under the heading “Provisions of note in 2 new interim rules”.
Accrued interest will be forgiven with the rest of forgiveness (no guidance on interest calculation for partial forgiveness) (page 7)
Still no confirmation one way or the other re: EIDL advance subtraction (page 8) — is this only for EIDL advances that meet the characteristics outlined in the CARES Act, or all EIDL grants?
Paid OR incurred (not paid AND incurred) — which means unpaid costs from prior periods are in fact eligible (page 9)
Supplements to salary/wages are included: e.g., bonuses, hazard pay, and additional wages paid to replace tips (except to owners in excess of 2019 income) (page 11)
Payroll to furloughed employees is included (page 11)
Owners are limited to 8/52 x 2019 compensation (shareholder-employees can also include health insurance and retirement employer contributions, but not Schedule C sole proprietors or partnership partners)
Otherwise not limited to 8/52 of costs (except owner payrolls) (page 12-13 utility example)
Prepayments are allowed (only mortgage interest specifically excluded) (page 13)
Salary/wage reduction (page 19) appears to take hours-worked into consideration for salaried employees — but heads-up: that is not reflected in the AICPA workbook
Similarly, loan forgiveness will not be reduced for exemptions (page 22), but only an FTE solution is offered; I suspect this means that for the wage reduction spreadsheet, only employees working during the 8-week forgiveness period should be included. (I’ll be asking AICPA to clarify this in the instructions.)
And although not new, I felt they drove home the point that we should make sure to maintain written records of any employees who voluntarily resigned. This will be part of the documentation when substantiating the forgiveness application.
There will be an opportunity to respond to SBA questions regarding loan forgiveness substantiation before a decision is made (page 9)
There will be an appeal process if eligibility is denied by SBA (page 10)
The lender will have to review but not audit (independently verify) all documentation and calculations supplied by the borrower, before submitting to SBA
The lender may rely on third-party payroll processor records (not required to review source data unless these records are not available) (page 11)
Lenders may rely on borrower representations, but must confirm calculations and substantiation (page 12)
No date yet by which forgiveness application is due – but bank then has 60 days to submit to SBA and SBA has 90 days to respond (page 12) …so it could easily be well over 5 months before you find out whether you got forgiveness.
In summary, I’d say some of these were already clear from the forgiveness application but they finally put it in writing; and some actually confirmed something I could only guess at before; but a few examples actually drove home some important new — or previously vague — points; others were just confirmation that we still don’t know some things, such as the all-important EIDL question.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
UPDATE: AICPA has partnered with a Fintech lender to create an online version of their forgiveness tool — www.PPPForgivenessTool.com — available free of charge. More on the project here. The spreadsheet below still works, and I personally prefer it, but the online tool is easier to use if you don’t already have background into how the PPP rules work.
My husband and I have collectively spent nearly 18 hours preparing, updating, editing and testing our PPP Forgiveness spreadsheet, as well as comparing it with colleagues’ versions… only to be stymied at every last moment — each time we were ready to “go live” with it, some new guidance, analysis or interpretation was released that had us going back to the drawing board. At this point I’m joking with my clients that it’s a mythical creation.
And it might have to stay that way — the AICPA has done such an incredible job with their version that I’m not sure we can do any better.
It’s not pretty, and it’s a bit clunky, and there’s no budget tool or FTE calculator included — but the logic is sound and it does a lot of the calculations for you. And they’ve made it public! Just scroll down to where it says “PPP loan forgiveness calculator“.
CPA Practice Advisor notes, “As the AICPA has emphasized throughout this process, questions surrounding guidance make critical decisions unnecessarily challenging and complex for PPP loan recipients and those who are considering applying for the program.” They created a loan forgiveness calculator last week that reflected both the latest SBA guidance and additional AICPA recommendations, and presented it to Treasury. Unfortunately that was not the version that became the final application (released this past Friday night).
“The AICPA loan forgiveness calculator provided more support and details than the SBA loan forgiveness application, and we will continue to encourage Treasury and SBA to leverage our recommendations,” said their VP of Firm Services.
So they reconciled their previous version with the forgiveness application, released it to the public — and you should use it.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Because some politicians involved with the drafting of the forgiveness rules had been saying on twitter that a longer time-frame and more flexibility on how the funds can be spent were key to making the PPP more effective, we had been hoping for an application reflecting these characteristics — but it did not turn out that way. The entire thing at this point feels like “too little, too late”.
What Were Hoping For But Did Not Get (The Bad News)
An extension to the 56-day (8-week) forgiveness period (at least for restaurants, bars, cafes and other fully- or partially-closed businesses)
Simplified rules for FTE and salary/wage reduction calculations
EIDL advance funds used for non-PPP purposes exempt from forgiveness subtraction (per analysis by many colleagues, this is still the case; but on the application it is not apparent, and many banks will not understand the subtle distinctions)
What We Did Get (The Good News)
Unpaid rent and utilities from a period prior to forgiveness can be paid during the forgiveness period
Rent and utility payments made shortly after the forgiveness period can also be included, if for services during the 8-week timeframe
Forgiveness period — as it relates to payroll costs (including employer portion of health insurance and retirement) — can be delayed to coincide with the first pay period after disbursement
If an employee was fired, quit, or voluntarily had their hours reduced due to non-pandemic reasons, their FTE and salary/wages will not count against the employer
Safe harbor for salary/wage reduction (however, additional complicated calculations are required)
Safe harbor for FTE reduction (however, additional complicated calculations are required)
Clarification on various calculations (e.g., FTEs, forgiveness phase-out, and forgiveness reductions)
There is a lot more to unpack, of course, but those are some highlights. I recommend the following excellent articles for step-by-step explanations and analysis (no, I do not have any affiliation with Forbes — I just think they are writing some of the best material on the topic these days). Also, many thanks to colleague Andrea Carr CPA for preparing a Fillable Version of the SBA PDF Forgiveness Application.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
No, I have not analyzed it yet, and my birthday is this weekend, so please understand that I may not have feedback on it until Monday. (Unless it keeps me up all night obsessing over it.) Thanks for your patience!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
One of my favorite aspects of the work I do is engaging with people and sharing knowledge. With so much confusion in the current climate, especially surrounding small business survival, I’ve been pleased to have opportunities to dispel some of the misinformation out there and bring clarity to extremely challenging topics.
Among the most recent appearances were ABC 7 Chicago, WRLR Radio, and Q&A sessions with State Representative Will Guzzardi — at his most recent Town Hall — as well as professional organizations Bookkeeping Buds and the Logan Square Chamber of Commerce. (See the Speaking Engagements section of my Services page for links to all the above and more.) My interview with Block Club Chicago went on to inspire a favorite recent blog post.
And at times I’ve even been so lucky as to share the stage with clients, most recently Chris Busse of Penguin Foot Pottery and Dinah Grossman of Spinning J Cafe & Bakery. These folks inspire me daily and are one of the reasons I do what I do (well, two of the reasons). Their companies have focused on taking care of employees above all else — not only their safety, but also their financial well-being and health benefits. And they have harnessed their own creativity, resiliency, and flexibility as true entrepreneurs to carve out a new space for their offerings in a vastly different world, redefining themselves in the process.
Spinning J is offering homemade comfort food and groceries — full dinners available for pick-up or delivery, along with take-and-bake rolls and their famous pies. The decision to stretch their prep time so that staff work 24-hours-a-day in shifts, and to have their own employees run deliveries, allows them to maintain social distancing while keeping the paychecks coming. And by offering grocery staples, they are helping their vendors and maintaining supply chains as well.
If you are a small business owner looking for ways to pivot your business and re-imagine yourself, see my recent blog post on Small Business Advice. If you run a professional or public organization and are looking for an impassioned speaker full of knowledge on small business relief options, reach out to me to see if we’re a good fit. And if you want to learn pottery or eat comfort food from the safety of your home — or any number of other amazing offerings — check out my awesome clients.
