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SBA PPP Forgiveness is Tricky
The moment you got funded by PPP funding the clock started ticking. We have eight weeks to use 2.5 months of payroll funding
We must use the funds for allowable cost and only a subset of allowable cost are eligible to be forgiven. For example, PPP funding is allowable to be used for W2 employee payroll but only amounts under the annualized $100 k cap per person are eligible for forgiveness. Another tricky example is that PPP funding is allowable to be used for interest expense but this amount is not eligible for forgiveness.
It’s kinda tricky, right? Especially considering that the rules are still being written.
Already CEOs are getting notifications that if they are not adversely impacted by the pandemic they have a deadline to return the PPP funds without penalties. If the CEOs don’t return the funds they may be subject to audits or another scrutiny.
In the original application, CEOs certified that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” According to the WSJ Daily Shot, uncertainty is at an all-time high.
It seems that the SBA is redefining the funding criteria in the middle of the game. Most areas haven’t emerged from the pandemic and many businesses are striving to recover.
The basic requirements of PPP funding use and forgiveness are 1) maintain or increase full-time equivalent (FTE) staffing of W2 employees, 2) maintain or increase wages paid out, and 3) be able to prove adverse economic impact.
If you come up short on these points, work through the finer points to optimize using PPP funding well as Congress intended and to maximize forgiveness. Always keep good documentation.
If you are the CEO of a competitive growth company and want to plan and execute with clarity and confidence, email me to learn about what it’s like to have a team of Growth CFOs working side by side with you. Kirk@foresightcfo.com
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