PPP Loan FAQs
We know there are many questions regarding the PPP loan, so we’ve compiled some frequently asked questions we are receiving to help guide you through the process. Please also see our PPP & EIDL Applications blog post for further information.
1. Q: What can I use the loan proceeds for?
A: You may use your loan proceeds to pay for 2 categories of expenses; payroll cost and non-payroll costs.
- Payroll costs consist of gross wages paid (including costs for employee vacation, parental, family, medical, and sick leave), costs related to the continuation of group health care benefits, employer contributions to retirement, and payment of state and local taxes assessed on compensation of employee (state unemployment).
- Non-payroll costs include mortgage interest payments (omitting mortgage prepayment or principal payments), rent, utilities, and interest payments on any other debt obligations.
- We believe that you need to have entered into a signed lease or service agreement prior to February 15, 2020, for these costs to qualify.
2. Q: Help! I need someone to assist me with filling out the PPP & EIDL loan applications. Who do I go to?
A: We are happy to help you (clients and non-clients) with filling out your loan applications and compiling your required documents for submission. Give us a call at (608) 356-7733 or email us at email@example.com and we will put you in touch with one of our highly trained MBE service team members.
3. Q: I see that you are recommending I segregate my loan proceeds into two separate accounts. Do I have to split the funds 75% for payroll and 25% for other costs, or can I allocate the funds differently?
A: Yes, but you should only adjust this split to add more to payroll. You should not allocate more than 25% to non-payroll costs.
4. Q: What happens to any loan proceeds that aren’t forgiven?
A: The amount of the loan proceeds that are not forgiven will convert into a loan. The terms of that loan will be 1%, and matures in 2 years. If you follow our segregation suggestions, then any money not spent for qualified costs that are subsequently not forgiven will be immediately available for repayment.
5. Q: What happens if I don’t use all the loan proceeds I requested?
A: Any amount of the loan that is not used for a qualified purpose will not be eligible for forgiveness and will need to be repaid. See question #4 above.
6. Q: What documentation will be required to verify expenses that are eligible for loan forgiveness?
A: We have not received specific guidance on this yet. It is logical to keep all invoices and payroll records for qualifying expenses. We recommend you keep them in a separate file to be ready for the documentation requests that will be coming when it is time to ask for loan forgiveness. In addition to the invoice or payroll records, we recommend you keep proof of payment of those expenses. This can include canceled checks, bank statements, and wire transfer receipts. Segregating the funds into different separate accounts will assist you with record keeping.
7. Q: I read that if I do not use 75% of my loan requests for payroll I will not eligible for ANY forgiveness, is this true?
A: At this time we do not believe this to be true. Any funds that are not spent will not be eligible for forgiveness. Furthermore, of the proceeds you will ask to be forgiven, no more than 25% of loan forgiveness can be non-payroll costs. This is why it is recommended that you segregate the funds; therefore if you don’t spend it all, the unspent funds you set aside are available for repayment.
8. Q: What are some things that could reduce the forgiveness of my loan?
A: There are multiple things that would reduce the forgiveness of your loan, which may include the following:
- Not spending the funds on qualified expenditures, or not spending the funds at all.
- Spending greater than 25% of the forgivable expenses on non-payroll costs.
- Reducing your Full-Time Equivalents (FTEs) count.
- Paying an employee less than 75% of what that employee was making in the last completed quarter (this will be the 1st quarter of 2020 in most cases, which is defined as January 1 to March 30, 2020).
- If you receive an EIDL grant of up to $10,000, the grant received will be subtracted from the forgiven PPP loan amount.
9. Q: How will the FTE’s be counted when calculating forgiveness?
A: Guidance on this has not been issued yet. For employers with seasonal or part-time staff, this will be a very important part of the calculation. We know there will be two options when it comes to calculating your prior FTE count.
- Option 1: Average number of FTEs per month from February 15, 2019, to June 30, 2019.
- Option 2: Average number of FTEs per month from January 1, 2020, to February 29, 2020.
The guidance we are waiting on relates to the specific calculation of FTEs. Until that information is issued it would be logical to use the FTE calculation methodologies prescribed in the Affordable Care Act.
10. Q: When does the 8 week window to spend the funds start?
A: 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 no later than 10 calendar days from the date of approval. TIP: If you are a summer, seasonal business that would naturally be increasing payroll towards the end of June, we recommend that you talk to your lender about disbursing the funds towards the end of that 10 days window.
11. Q: I am an employer that had to lay my employees off at the start of the shutdown. How much should I pay my employee when I bring them back to work?
A: This can be a complicated question to answer and we suggest you talk this over with our MBE service team members. You may also contact our trusted partners at Workforce Solutions, Sue Matis at firstname.lastname@example.org, Dawn Urban at email@example.com, or Christine Storlie at firstname.lastname@example.org.
Remember that any amount of the loan proceeds you receive that are not spent on qualified costs will need to be repaid. In addition, you will need to pay your employees at least 75% of what they were making in the previously completed quarter otherwise the amount that is less than 75% will not be eligible for forgiveness.
12. Q: Am I supposed to use these funds to pay my employees just to stay at home, or what should I do with my employees when I bring them back?
A: The purpose of the program is to have the workforce 100% in place and ready to go when the period of social distancing is over and business can resume. That being said, this is a great time to employ your workforce to work “on” your business by working on things you have either put off or have never been able to achieve. Give your kitchen a deep cleaning, organize your office, train your employees, have your employees cross-train each other, work on your strategic plan, brainstorm how to make your processes more efficient, work on your customer relations, or explore ways to be cost-effective. Be creative with this opportunity to work on your business and make improvements for when this social distancing period is over.
13. Q: I am worried my employees will not want to come back to work because they are making more on the expanded unemployment than they will working, how do you suggest I handle this?
A: This is a common question we receive. We suggest you reach out to our partners at Workforce Solutions, Sue Matis at email@example.com, Dawn Urban at firstname.lastname@example.org, or Christine Storlie at email@example.com, for the appropriate way to handle this situation.
14. Q: If I receive an EIDL grant for up to $10,000, how will that affect my PPP loan?
A: The amount of the PPP loan that is forgiven will be reduced by the amount of the EIDL grant that you receive. For example if you received a PPP loan for $18,000 and you spend the entire amount in a forgivable manner. Additionally, you receive a $10,000 EIDL grant, then the maximum amount of PPP loan forgiveness you can receive is $8,000.
15. Q: What is the best way to stay current on information regarding the PPP?
A: There is a lot of information being distributed related to the PPP loans. As your partner in business, we view it is our duty to you to filter through the information and misinformation related to this topic and distribute to you the information you need. Follow us on Facebook, review our online resources at https://www.mbecpa.com/coronavirus-resource-center/, stay in touch by subscribing to our newsletter and email communications, and as always do not hesitate to call one of your MBE service team members for help. If you are appreciative of the information and services we’ve been providing you on these topics please do not hesitate to leave us a positive review on either Facebook, Google or Yelp.
*Note this Q&A is meant to help answer some of the commonly asked questions we are receiving, which are related to the Payroll Protection Program (PPP). It is based on our collective research and understanding of the law and regulatory guidance as of 04/08/2020. New guidance is issued often; therefore, we are continually updating our understanding of the situation. We make no assurances that the information contained in this document will be the final guidance issued on these questions. This is simply our most current understanding of the situation.