Independent Operators

Feds make forgivable PPP loans easier to navigate

The federal government has introduced a simplified PPP loan application form in an effort to make the PPP loan process easier since the government announced the program in April as part of the Coronavirus Aid, Relief and Economic Security Act.

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June 23, 2020 by Elliot Maras — Editor, Kiosk Marketplace & Vending Times

Small business owners hoping for more simplicity under the Paycheck Protection Program got their wish last week when the Trump administration released a simplified forgiveness loan application, according to a Yahoo News report.

The Small Business Administration posted a "borrower-friendly" five-page forgiveness application as well as a three-page EZ Version. The simplified version is for borrowers who are self-employed, have no employees, did not reduce the wages more than 25%, did not reduce employees' hours or experienced reductions in business activity due to the coronavirus pandemic.

The simplified form is part of an effort to make the PPP loan easier for companies to use since the government announced the program in April as part of the Coronavirus Aid, Relief and Economic Security Act.

Flexibility act signed

On June 5, President Trump signed the Paycheck Protection Program Flexibility Act, which extended the timeline for companies to use the money from two months to 24 weeks.

The flexibility act also gave borrowers until Dec. 31 to rehire workers and have their salaries eligible for loan forgiveness. Employers previously had until June 30.

"They want everyone to be able to get loan forgiveness," Megan Angle, a CPA at Chicago based Porte Brown Accountants & Advisors, said during a recent webinar on the PPP changes sponsored by the Amusement Machine Operators Association.

The flexibility act also increases the current limitation on non-payroll expenses such as rent, utility payments and mortgage interest for loan forgiveness from 25% to 40%, Angle said.

"I think we will find there will be a lot more payroll coverable expenses," she said.

Loan terms extended

The new law extends the loan terms from two to five years, which gives borrowers more time to pay any payable loans. A business does not have to rehire all employees that were laid off by June 30 to qualify for the fully forgivable loan.

"We've alleviated that pressure of having to have that June 30th calculation," Angle said.

At least 60% of the amount forgiven will be used for payroll cost, she said. Other eligible expenses are rent, mortgage interest and utilities. These other eligible expenses must have been agreed to prior to Feb. 15, 2020, she said, and the expenses must be documented.

"You have to actually submit the bill that includes Feb. 15 to prove that this was a utility that you had set up," she said.

The 24-week period for the loan begins the date the borrower received the funds and ends 56 days later. Payroll costs are considered paid on the day the paychecks are distributed or the day the borrower originates an ACH credit transaction.

Payroll costs are considered incurred on the day the employee's pay is earned. Costs incurred but not paid during the last pay period of the covered period — or an alternative payroll covered period allowed under the law — are eligible for forgiveness if paid on or before the next regular payroll date.

"You essentially can choose either paid or incurred," Angle said. The choice is between a cash basis or an accrual basis.

Vacation pay for employees who resign or are terminated is a qualifying expense.

The other eligible expenses must also be paid during the covered period or incurred during the covered period on or before the next regular billing cycle.

Access to tax deferment

The law also ensures full access to payroll tax deferment.

"You want to know whatever you're deferring (that) you're going to be able to pay in on time," Angle said. "Payroll tax is not something you want to mess around with."

The full-time equivalent calculation under the law is based on 40 hours a week for one full-time equivalent. Those working less than this will be rounded to the nearest tenth; i.e., someone working 34 average hours per week would be 0.85 FTE. Borrowers also have the option of allotting anyone working less than 40 hours as 0.5 FTE.

Owner employees, general partners and self-employed people are not treated as employees, Angle said. Hence, they are not factored into the full-time equivalent number. "The owner compensation is pretty much pulled out," she said. Payroll related expenses attributed to owners also cannot be applied as employee expenses.

Independent contractors also do not qualify as employees, Angle said.

She suggested borrowers create a PPP loan file since a lot of information will be needed when applying for loan forgiveness. It is important to maintain the average employee count, the compensation levels, qualified non-payroll costs.

While borrowers are not required to have a separate bank account for the PPP funds, Angle suggested they do this as the information is subject to government audit.

About Elliot Maras

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Elliot Maras is the editor of Kiosk Marketplace and Vending Times. He brings three decades covering unattended retail and commercial foodservice.