Replay, Q & A and updates to SBA PPP Loan Forgiveness

Apr 22, 2020

Updated May 4, 2020

Thank you to all those who joined us for the April 22 Webcast on SBA PPP Loan Forgiveness . Answers to questions posted here and any relevant updates.

Watch the replay

View or download the Slide Deck

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Gerry Smith, Maui Economic Development Board (MEDB), Wayne Wong, Small Business Development Center (SBDC) and Robert Kawahara (Kawahara + Hu LLP) discussed  how to successfully administer your PPP Loan to maximize your chances that it will be entirely forgiven. 

  • What costs are you allowed to pay?
  • What should you do to maximize the opportunity for forgiveness of this loan?
  • How can you prepare now to ask forgiveness 2 months from now?
  • plus get a tool for tracking your loan expenses.

This webcast is the third of an ongoing series – the COVID-19 Business Assistance Series, sponsored by the County of Maui, aimed at helping our small businesses navigate the resources available to them, with clear step-by-step instructions.

As a small business owner for the past 19 years, I’ve been viewing a lot of webinars on EIDL & PPP programs. I have found that the series of webinars that you folks have been doing has been the easiest to understand.  I appreciate the amount of time that was taken to put together the information, getting a panel of experts and make it available to not just the business owners in Maui county but all business owners.  I currently reside in Honolulu and have been doing work on Molokai for over 15 years and it was through the Kuha’o Business Center email blast that I was informed about these webinars. The webinar that was presented on Wednesday April 22nd  “SBA Paycheck Protection Loan Program (PPP) Forgiveness” was more than what I was expecting.  The one thing that I was thrilled to see was the example of the Zero Loan and how you did a excel spreadsheet to demonstrate what you would do if you needed to keep track of this money.  THIS IS WHAT I WAS LOOKING FOR.  I’ve been approved for the PPP program and my banker is hoping to have the loan ready by the end of the month and this will be so helpful for me.
Thank you again for thinking about all these things that we need to pay attention too.  AWESOME JOB!!!!


Q & A

Q: Within our 60 day period, if we only use 30% of the loan for Payroll, and 25% for rents ( but bring our employee level back completely by June 30) will we be forgiven both of these amounts, or will they be discounted because we did not use the entire loan amount?  (All of our landlords want to know how much of our PPP loan they will get for their rent). We expect that we are going to need the funds for continued payroll after June 30.

A: You can’t think of the loan in terms of simple percentages like that, it’s not quite that easy. Take an example of a $100k PPP Loan. 75% of $100k is $75k. Payroll SHOULD be $75K. If your payroll was EXACTLY $75k, then Non Payroll (NP) would be fully forgivable at $25k. Perfect world.

But now what if you only use 30% of the $100k for payroll? That’s only $30k of Payroll costs, not $75k, but the rule remains the same.  Non Payroll costs cannot be more than 25% of total loan amount. Divide $30k of Payroll by .75 and you get $40k (to calculate total costs). $40k total costs-$30k of payroll costs = $10k of Non-Payroll costs, so the maximum of forgivable Non Payroll costs are now $10k. If you spent $25k on Non Payroll and $30k on Payroll, by my rough math, $15k of the Non Payroll costs would end up as a loan and not forgiven.

Q: I have a staff member (or two) that are retiring and/or moving to the mainland during the 8 week PPP tracking period.  Their specific positions/jobs should not be replaced immediately since the jobs they do are not in any way needed while we are closed for the Pandemic.  However, could I hire additional maintenance personnel to assist with cleaning and sanitizing during this period to equal the retiring/moving persons salary in order to maintain staffing and payroll levels outlined in our PPP application and therefore qualify for “forgiveness”?

A: There is nothing in the Interim Final Rule that precludes you from back-filling a needed position, especially when that person would be working. Nothing in the rule mentions “person”, rather “FTE” which is a specific job, not a specific person. That being said, we are still operating under “Interim” rules, and look forward to a final rule.

Not sure what the people did who you cannot retain, sounds like the FTE position you would be hiring would be “maintenance worker” or something like that, so the expectation is that the people who are retiring or moving to the mainland were in a similar position for similar pay. As a ridiculous example, backfilling the Executive Director position with a Maintenance worker probably would receive scrutiny.

Try to think this way, you told SBA what your monthly payroll estimate was, and you used historical data to arrive at that number. They gave you a loan for that exact amount plus a little extra. Now, go perform to that number. If you lose a Maintenance Worker 1 position, hire a MW1 for 8 weeks.

Q: The timeline states that the covered period is from 2/15/20-6/30/20?  Does this mean we can use expenses previously paid from this period, before we were granted the loan?  Or if our 6/30 pay period is paid on 7/03, does this pay period still count, although it will be paid outside of the period?

A: The timeline you refer to is for the whole Payroll Protection Program -when applications/disbursements are authorized by CARES Act.  FOR Forgiveness: the covered period, when you have to use the money appropriately, is eight weeks, commencing the day you actually receive funds from the lending bank into your account. In answer to your specific question, even if your eight weeks ends June 30, the incurred payroll cost will not be allowed if you paid outside the covered period.   This is tricky because what can be forgiven are payroll costs “incurred and paid” in the eight week covered period -which generally does not sync well with most payroll weeks. Everyone is awaiting clearer guidance from the SBA who is looking into this, however, the current guidelines say that for forgiveness, 75% of your loan proceeds must be spent on payroll costs incurred and paid within the eight week covered period.  Most clients are looking at ways to calculate a pro-ration, invoicing themselves and paying from a PPP checking account into their normal payroll account which then meets the incurred and paid within the eight week covered period.

Q: As far as double dipping, if some staff are using the Families First sick leave ACT benefits, which were not previously budgeted for, can these expenses be counted towards the loan?

A: NO, Families First benefits are specifically mentioned as an example of double dipping if you pay for that with PPP proceeds.

Q: We have 42 employees, of the 42, we have one that have reduced time due to meaningful work available, does this reduction still meet the 75% payroll cost qualified, as I calculate this reduction still using 97% of expenses in payroll?

A: It does sound like you would still meet the payroll costs of 75% of loan proceeds but be careful on your percentage calculation, remember loan proceeds is higher than payroll costs as loan proceeds were calculated at 2.5 X monthly average (which is 10 weeks of money).  The PPP is designed to preserve employees’ payrolls with no regard for what work/tasks are being done. To meet the headcount requirement, many PPP recipients are paying full pay and benefits for the employee to stay at home which is no problem. So you could restore the full pay of that particular client for eight weeks or what some other clients are doing, providing bonuses for their employees to meet the 75% of loan proceeds spent on payroll costs.