Welcome to our webinar!meet.bench.co/rs/729-JTY-427/images/5_6 _ PPP Forgiveness Prese… · To...

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The PPP and ForgivenessEverything You Need to Know as of May 6th, 2020

Snapshot: The Funding Landscape

Webinar | The PPP and Forgiveness

Clarity

Government funding● Applications for the EIDL are open solely for Agriculture

businesses, PPP applications for the second round are open

● The EIDL had $17b of funds to offer and over $370b in applications

● Applications for the PPP were opened April 27th with approximately $129b left

● $60b has been allocated solely to just community banks

● POTUS has proposed a payroll tax holiday which is currently being debated in comparison to refunding the PPP.

Private funding● Private funding options exist, but the

specifics vary across providers

● Loan terms will be less flexible and have higher interest rates

● We consider this to be more prevalent in the future. We will update when we have more information.

Focus for today


● A bill for new coronavirus aid was passed on April 23rd, 2020 and signed on April 24th

● Some larger companies that have applied for the PPP may be reprimanded for taking PPP funds and will possibly give back

○ $2 billion was returned from the first round

● Included in this next round of funding is:○ $310B for the SBA Paycheck Protection Program○ $60B for the EIDL

● PPP funds are available now

Snapshot: The Funding LandscapeClarity

● You have an opportunity to have the entirety of the PPP loan forgiven if you follow the guidelines set out by the SBA. But how does forgiveness work?

● This means the liability will be waived and you will not be required to pay back the forgiven portion of the funds

● You do not need to pay:○ The forgiven portion of loan itself○ Any interest○ Any fees○ Any taxes on the loan amount

● This essentially makes the loan free money akin to a grant so long as it used for the qualified expenses as outlined by the SBA


What is loan forgiveness?Guidance

● Once the funds from the PPP have been dispersed, the 8 week period of forgiveness will begin

● To recap, here are the expense types that are eligible for forgiveness:○ Payroll○ Mortgage interest○ Rent ○ Utilities

● Forgiveness for the PPP follows a 75/25 rule○ At least 75% of your loan must be used for payroll costs ○ 25% or less of the loan can be used for operational costs ○ Payments to independent contractors cannot be included in the payroll costs

● Let’s look into what falls under these expense types and what documentation will be required to apply for forgiveness


Forgiveness and the PPPGuidance

● Included in payroll costs are:○ Salary & wages ○ Vacation, parental, family, medical, or sick leave, ○ Group health benefits

● Payroll documentation will need to be provided that covers the totals on the above costs for the payroll periods covered in the 8 week period.

○ This documentation should be provided to you via your payroll provider○ We will cover how forgiveness applies to self-employed individuals without payroll

later in the presentation

● For payroll expenses to be eligible for forgiveness, certain requirements must be met depending on the numbers on your application:

○ You must maintain the number of employees on your payroll.○ You must maintain at least 75% of total salary.


PayrollGuidance

● Determine your FTE employee count for the 8 weeks (A)

● Determine your FTE employee count for:○ February 15, 2019 to June 30, 2019 (B1)○ January 1, 2020 to February 29, 2020 (B2)

● Take the larger of A/B1 and A/B2, if that number is less than 1, your PPP forgiveness eligibility will decrease proportionately

○ If you are a seasonal employer, you must use the number obtained by B1

● Let’s look at an example with actual numbers


Maintaining headcountGuidance

● For example, if you will have 8 employees for the eight weeks, but had 10 employed for February 15, 2019 to June 30, 2019 and 12 for January 1, 2020 to February 29, 2020…

○ A/B1 = 8/10 = 0.80 (80%)○ A/B2 = 8/12 = 0.75 (75%)○ In this example, the business would only be eligible for forgiveness on 80% of the

total forgivable amount because the workforce has been decreased


Maintaining headcountGuidance

Forgiveness periodA

Feb 15—Jun 30B1

Jan 1—Feb 29B2

8 10 12


Maintaining payrollGuidance

● This will be individually assessed for each employee that did not receive more than $100,000 annualized pay in 2019 to ensure payroll is being maintained across all individuals, not just in aggregate

● If an employee’s pay over the 8 weeks is less than 75% of the pay they received during the most recent quarter in which they were employed, the eligible amount for forgiveness will be reduced

● The reduction will be by the difference between their current pay and 75% of the original pay


Grace periods and exemptionsGuidance

● You have until June 30 to bring your staff headcount and/or pay to original levels without penalty

● If you offer to rehire a laid-off employee but they refuse, it will not affect the headcount condition

○ To qualify for this exemption:■ You must have made a good faith offer in writing■ The offer must have been for the same position, pay rate, and hours■ The rejection must be documented

○ Payroll reports will provide you with info on (1) wages, (2) group benefits, and (3) taxes

○ Payroll tax filings (Form 941) will verify (3) was paid

○ Receipts for Income, payroll, and unemployment insurance filings from your state in (3)

○ Documents verifying any retirement and health insurance contributions in (2)

● You will be required to provide documents verifying the number of full-time equivalent employees on payroll and their pay rates, for the periods used to verify you met the staffing and pay requirements:


Payroll documentationDocumentation


IRS Form 941Documentation

● Quarterly filing of Federal Taxes for employees

● You should be providing one form 941 to verify that the Federal Taxes were paid in that 8 week period


Mortgage interestDocumentation

● If your mortgage was in place before February 15th, 2020, the interest portion of these payments are eligible for forgiveness

● All mortgage statements should have the highlighted section that shows a breakdown of the payment due

● Escrow and principal portions are not eligible for forgiveness

● Keep these statements for when you file for forgiveness to verify the amounts that were interest only


Rent/LeaseDocumentation

● As with mortgages, the agreement must have been in place prior to February 15th, 2020

● A rent or lease agreement should be presented when applying for forgiveness so they can verify

○ The cost of the rent○ That it’s in the business name○ When the agreement was signed


UtilitiesDocumentation

● Included in utilities:○ Water○ Gas○ Energy○ Phone○ Internet

● Collect bills for each payment made in the 8 weeks for when applying for forgiveness

● You should have a bill that corresponds with each amount paid in that period


Forgiveness when self-employedGuidance

● As a Sole Proprietor, you are entitled to a portion of the loan amount to make up for lost profits

● The amount you are eligible for forgiveness on would be the percentage of your reported net income that would have occurred in that eight week period

○ To calculate this amount, take your Net Income from line 31 of your Schedule C and multiple it by 8/52 (approximately 0.15385)

● The remaining funds can still be used for mortgage, rent, lease, and utilities, only if these were eligible as deductible expenses in 2019

○ If you did not include rent, lease, mortgage interest, or utilities on your Schedule C in 2019, these expenses will not be eligible for forgiveness for your PPP

Remaining fundsGuidance

● If you do not have eligible expenses for the remaining portion of the PPP and cannot use the entirety of the loan amount, what can you do?

● You have the option of paying back the remaining balance at no penalty○ After you’ve applied for forgiveness and have received confirmation on the amount

you will be forgiven on, you can pay back the remainder of the loan at no penalty

● Payments for the loan are deferred for 6 months which makes the loan a viable, low interest option for sustaining eligible expenses beyond the 8 weeks

○ In your application, you will have stated that the PPP funds will only be used for eligible expenses (payroll, rent, lease, mortgage, utilities)

○ If you are going to use the PPP as a low interest loan, continue only using loan funds for the outlined expenses even if they will not be eligible for forgiveness

○ The SBA can penalize you with fines and even charge you with fraud if PPP funds are knowingly used for expenses not outlined in law



Working with BenchAction

● Your bookkeeper can work with you to ensure you are getting the most value out of our services once you receive funding from the PPP

● We can provide:○ Insight into what of your expenses will be eligible for forgiveness○ Provide you with up to date reporting on what your funds have been used on○ Collect your documents in a single place for reference when applying

● Here are some tips to get the most out of your Bench account


Document collectionAction

● Your Bench account comes with a page that you can upload documents to● An email of receipts+[businessname]@bench.co will also forward documents here● You can keep all documents here or request your bookkeeper move them to a specific

folder for safekeeping


Using your Income StatementAction

● Your Income Statement can be customized to show any date range

● Set the Start as the day the funds were disbursed and the End as 8 weeks out

● Review Payroll Expense - Salary & Wage, Payroll Expense - Payroll Tax, Rent or Lease Expense, and Facility & Utilities to get immediate insight to how much has been spent on expenses eligible for forgiveness


What if you are not approved for forgiveness?Guidance

● Some lenders may follow up with a chance to provide additional documentation or make the argument for your expenses to be eligible for forgiveness

● In the case that you are denied for forgiveness on the entirety or part of the loan, the outstanding balance can be paid back immediately at no penalty or interest

● The loan can be held onto and used for the eligible expenses at just 1% interest

● These funds will still need to be used for the outlined expenses for no penalty to be incurred

Questions

We’ll pause for a few minutes for more questions to be added before jumping in!

What’s Next? Join us Wednesdays 11 AM PDT for our Webinar and Q&A period

Visit our FAQ page where we’ll put our most up-to-date information: bench.co/blog/resources/client-financial-relief-faq

Check out our blog for updated resources on all things COVID Relief:https://bench.co/blog/

We’re here to keep you informed, and to help protect your business

https://bench.co/blog/resources/client-financial-relief-faq/

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