Forgiveness & Repayment
The Paycheck Protection Program (PPP) has undergone multiple updates and changes since its rollout. This presentation provides a comprehensive overview of PPP forgiveness and repayment, SBA updates, and what steps to take next. Learn about the program's history, lender involvement, and recent legislative changes. Stay informed and make informed decisions with the help of this detailed resource.
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Presentation Transcript
Paycheck Protection Program (PPP) Forgiveness & Repayment What Happens Next ? As of July 14, 2020 Martin (Marty) E. Smith, SVP Senior Lender
PPP Forgiveness & Repayment This presentation is for information only and should NOT be construed as legal or accounting advice. You are STRONGLY encouraged to work directly with your own counsel and professional advisors, including your banker, to ensure any decisions are what is best for you and your business.
PPPForgiveness & Repayment The Small Business Administration (SBA), charged with implementing the PPP, has made no less than 20 interim final rulings (IFR s) regarding the program. That means the program has been changed 20 times since being rolled out. No wonder if it seems there is another Zoom update meeting or PDF available with new PPP info There is! Just like this one, which puts all of this into practical, actionable terms that you can understand and act upon. Our goal and agenda: Recap a PPP timeline and activity Overview of SBA s updates to forgiveness and repayment What to do now and next Links to important forms Where to turn for the best information
PPPHow We Got Here The Small Business Administration s (SBA s) Paycheck Protection Program (PPP) is an unprecedented government initiative to provide desperately needed financial assistance to the small business community in response to the coronavirus pandemic. According to the Treasury Department, PPP has helped more than 50 million workers stay connected to their employers, which represents more than 75% of small business payroll in all 50 states. All of this was achieved over three months. While there were significant technical and logistical problems with SBA s launch of the program, banks of all sizes worked collaboratively with the government to make it a success.
PPPHow We Got Here In round 1, nearly 5,000 lenders across the country provided nearly 1.7 million small businesses with $349 billion in PPP loans in less than two weeks. Seeing the success and demand for Paycheck Protections Loans (PPP), Congress appropriated an additional $310 billion towards the program. In round two, lenders stepped up once again, and as of July 7, 2020, more than 5,400 lenders participated, including 3,570 banks with less than $1 billion in assets. Altogether, 4.8 million PPP loans have been made, totaling $520 billion, supporting 51 million jobs according to the SBA.
PPPHow We Got Here On June 5, HR 7010, the Paycheck Protection Program Flexibility Act of 2020 was signed into law. The legislation made the program more flexible, including allowing borrowers to use 60% of the PPP funds on payroll (rather than the original 75% requirement) and also extended the time that the funds had to be used from 8 weeks to 24 weeks. Originally set to expire on June 30, the PPP program has been extended until August 8. After starting off at a frenetic pace, the number of businesses seeking PPP loans has slowed, as much of the demand has been reached.
PPPHow We Got Here On July 6, the SBA chose to release PPP loan information at the request of Congress, the media and others given the significant taxpayer commitment to the program. This was NOT a decision made by banks that participated in the government program. Not all details about individual PPP loans were released by the SBA. For example, no borrower with a loan under $150,000 will be identified at this time. For these loans, only the city, state, zip code, number of employees benefited, and the congressional district will be identified, along with the name of the lender that made the loan. For PPP loans over $150,000, the SBA released the business name along with the information above. The SBA released a dollar range for these loans, not the exact amounts. Banks will continue to stand by their small business customers and do their part to help spur the economic recovery and limit the economic damage from this pandemic.
PPP Forgiveness & Repayment Self-Employed, Freelancers and Independent Contractors Good news for self-employed, freelancers and independent contractors who took the maximum loan amount based on 2.5 times their 2019 monthly income The latest updates ensure full forgiveness for this scenario. Note that with previous rules, the 8 week limitation made it difficult to get above the 75% payroll threshold for forgiveness. Based on the Flexibility Act passed in early June, here is what you will want and need to understand:
PPP Forgiveness & Repayment Flexibility Act Changes For loans made after June 5th, it extended the maturity date of the loan from two years to five years. The maturity date can also be extended for loans made before June 5th, if the borrower and lender mutually agree. The covered period for the loan forgiveness was extended from eight weeks to 24 weeks. However, borrowers with loans taken before June 5th can still choose the eight-week period. The Act reduced the amount that you needed to spend on payroll in order to obtain forgiveness from 75% to 60%. Originally, the Act made it sound like if you didn t get to 60% in payroll expenses, you didn t get any forgiveness. However, the SBA and Treasury later clarified even if you didn t get to 60% in payroll expenses you could still obtain partial forgiveness.
PPP Forgiveness & Repayment Flexibility Act Changes The Act extended the date to replace full-time equivalent employees (FTEs) and restore salaries from June 30, 2020 until December 31, 2020. It also allowed relief for those businesses that have a loss of FTEs because of Covid-19 related restrictions that prevent the same level of business activity through the end of the year. This is a significant help to those businesses who still have not been able to fully reopen because of stay-at-home restrictions. The most credible resource is to read if for yourself the link is provided below. However, your CPA, Accountant, Banker or other professional advisor is likely your best bet. Read it for yourself here: https://www.sba.gov/sites/default/files/2020-05/IFR%20Forgivenss%20FINAL.pdf
PPP Forgiveness & Repayment Owner Compensation Additional insight has been provided by SBA on how to calculate owner compensation, employee compensation and non-payroll costs. Owner compensation Eight weeks worth (8/52) of 2019 net profit (up to $15,385) for an eight- week covered period; OR 2.5 months worth (2.5/12) of 2019 net profit (up to $20,833) for a 24-week covered period. Excludes any qualified sick leave equivalent amount claimed under the Families First Coronavirus Response ACT (FFCRA). For those of you filing a schedule C, the first option is the same it has always been 2019 Schedule C line 31/52 * 8. The second option should also look familiar because that s how the maximum amount of your loan was calculated (2019 Schedule C line 31/12 * 2.5). Bottom line If you choose the 24-week covered period option, you will get full-loan forgiveness.
PPP Forgiveness & Repayment Owner Compensation As always, additional guidance answers some questions and raises others. In the rationale for the rule, the SBA specifically mentions owner compensation replacement for individuals with self-employment income who file a Schedule C or F but doesn t mention the owner-employees (e.g. S-Corp owners). Presumably, the $20,833 cap applies to them, too, since the current Schedule A on the application lumps owner-employees, self-employed individuals, and general partners together. Even so, it s confusing why they weren t mentioned/included.
PPP Forgiveness & Repayment Employee Compensation Employee Compensation The 24-week extension also increased the amount eligible for forgiveness to business owners with employees. The payroll costs including salary, wages and tips is still capped at $100,000 of annualized pay. But now instead of $100,000/52 * 8 (a max of $15,385 per individual), you get up to $100,000/52 *24, making the new maximum forgiveness cap $46,154 per individual for 24 weeks. Keep in mind the payroll costs also include covered benefits for employees (but not owners), including health care expenses, retirement contributions, and state taxes imposed on employee payroll paid by the employer (such as unemployment insurance premiums).
PPP Forgiveness & Repayment Non-Payroll Expenses Non-payroll expenses Loan forgiveness amounts for non-payroll expenses have also been extended to 24 weeks, making it much easier to meet loan forgiveness thresholds. Non-payroll expenses include: Mortgages: payments of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property incurred before February 15, 2020 Rent: business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020 Utilities: business payments for a service for the distribution of electricity, gas, water, transportation The incurred or paid still applies. So, you can count expenses that were incurred or paid within that 24-week period, which means you ll likely get some expenses that fall outside of the 24-week covered period as well.
PPP Forgiveness & Repayment Applying for Forgiveness The SBA has released two new applications: A revised, full loan application, and A new, EZ Version. The new EZ version applies to borrowers that: Are self-employed and have no employees; OR Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%. The EZ application allows eligible borrowers do do fewer calculations and less documentation. We re still waiting for more detail on how the application process will work. For example, can those filling out the EZ application apply now since it s based on 2019 information?
PPP Forgiveness & Repayment Applying for Forgiveness-What To Do Now While the SBA has released revised applications for forgiveness, your financial institution will be putting in place processes and procedures as well. Now is the time to contact whomever funded your PPP loan and inquire about the process and procedure to apply for forgiveness or to initiate repayment. Your legal counsel, accountant and lender are key contacts for you and your business. They will help facilitate this process on your behalf and communication is key. Reach out to them with any questions or concerns.
PPP Forgiveness & Repayment Questions ? Please take this opportunity to ask any questions There are experts on the line ready to try and assist.
First Nationals COVID-19 Response First National Bank is your community bank. The COVID-19 situation has stressed every aspect of our community as citizens, families, employees and employers, our health, well-being and livelihood are all impacted. Let s remember, thank, and provide special respect and appreciation for first responders and everyone involved with health care and helping those who are unable to help themselves, plus those essential workers who continue to keep us all going during this unique time. First National is here for you as a depositor, as a borrower, as a community! These resources were collected and gathered into this presentation especially for First National s small business community. Please reach out and utilize the expertise of your local community bank, your legal counsel and account for their combined experience, wisdom and business acumen. Together we are stronger and together we will prosper. First National s COVID-19 Response Site
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Whos Who & Where Executive Leadership Ron Long President/CEO Marty Smith SVP Senior Lender Rick James SVP Chief Risk Officer Mark Huber SVP Chief Financial Officer First National Bank Offices Board of Directors Brighton Michelle Williams, Branch Manager 9911 E Grand River West of Old US-23 Philip C. Utter, Chairman Retired/Owner Specialty Contract Carriers, Inc. Stanley B. Dickson Jr., Vice Chairman Attorney, Trowbridge Law Firm, P.C. Laurie Marshall, Branch Manager 8080 Challis Road South of Grand River Fowlerville Mary Tumbarella, Branch Manager 760 S Grand Avenue North of I-96 Genoa Laura Carpenter, Branch Manager 4299 E Grand River East of Latson Road Hartland Steve Jacob, Branch Manager 10700 E Highland Road East of US 23 Howell Carrie Newstead, Branch Manager 101 E. Grand River Downtown Howell HQ s Robert Clemente Managing Director, Behavior Care Solutions Timothy H. Corrigan Vice President, Corrigan Oil William R. Dickson Accountant, Dickson & Associates, P.C. Commercial Lending Team Marty Smith, Senior Lender Dorothy Harrison Jim Johnston George King Paul Michon Mark Nowacki Maureen O Donohue Joe Petrucci Rob Rose Vivianne Rousseau Ronald L. Long President/CEO, First National Bank Kenneth Marblestone Managing Director, Cascade Partners R. Michael Yost Retired CEO, MPY Group, LLC Retired, Managing Director, The Auto Club Group Carrie Conine, Branch Manager 2400 W Grand River Inside Howell VG s Whitmore Lake Angie McFarland, Branch Manager 9775 M-36 West of US-23 First National Bank PO Box 800 Howell, MI 48844-0800 517.546.3150 | FNBH.com
