Paycheck Protection Program - SBA Loans - Forgiveness Question

[Anonymous]

I'm not sure if this question is in the right forum so Jeff, please feel free to move it. I'm on the board of a non-profit that plans to apply for a loan so I've listened to a bunch of webinars, etc. As I understand it now (and I'm still researching), as long as your keep the same amount of full-time employees between now and 6/30/2020, the loan will be forgiven. Does that mean that a business can still get the full loan amount forgiven if they then discharge employees or reduce salaries on 7/1/2020? I plan to read the statute today but have not seen this question addressed in any FAQ's. Thank you!

[Anonymous]

Anonymous wrote:I'm not sure if this question is in the right forum so Jeff, please feel free to move it. I'm on the board of a non-profit that plans to apply for a loan so I've listened to a bunch of webinars, etc. As I understand it now (and I'm still researching), as long as your keep the same amount of full-time employees between now and 6/30/2020, the loan will be forgiven. Does that mean that a business can still get the full loan amount forgiven if they then discharge employees or reduce salaries on 7/1/2020? I plan to read the statute today but have not seen this question addressed in any FAQ's. Thank you!

My reading of the act is that you get 100% forgiveness of loans so long as:
-You use the loan proceeds for approved expenses: wages, leave, rent, mortgage interest, utilities, etc
-Your head count in the 8 weeks after loan "origination" is the same or greater than one of two periods: Jan 1 to Feb 28, 2020 or Feb 15 to June 30, 2019 (your choice on which time period applies); and
-You don't reduce average wages by more than 25%

You get partial forgiveness if the head count falls or wages are reduced by more than 25%.

You really need to read the law yourself and figure out how much you can borrow and how the forgiveness will work in the case of your organization.

You can read the details of the loan program here (start at page 9 of PDF for loan program & calculating your max borrowing amount, see page 41 for loan forgiveness requirements): https://www.documentcloud.org/documents/6819239-FINAL-FINAL-CARES-ACT.html

My view is that the ideal strategy is to lay off people immediately so they can collect unemployment and your organization can hoard cash. Then rehire everyone as soon at the loan is "originated" (whatever that means). My guess is that SBA will need time to set it up and for your local SBA lending bank to get everything in place to process applications. Talk to your local SBA banker now.


See this thread: https://www.dcurbanmom.com/jforum/posts/list/868675.page

[Anonymous]

In my research I came across this helpful document:

https://www.uschamber.com/sites/default/files/023595_comm_corona_virus_smallbiz_loan_final_revised.pdf

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm not sure if this question is in the right forum so Jeff, please feel free to move it. I'm on the board of a non-profit that plans to apply for a loan so I've listened to a bunch of webinars, etc. As I understand it now (and I'm still researching), as long as your keep the same amount of full-time employees between now and 6/30/2020, the loan will be forgiven. Does that mean that a business can still get the full loan amount forgiven if they then discharge employees or reduce salaries on 7/1/2020? I plan to read the statute today but have not seen this question addressed in any FAQ's. Thank you!

My reading of the act is that you get 100% forgiveness of loans so long as:
-You use the loan proceeds for approved expenses: wages, leave, rent, mortgage interest, utilities, etc
-Your head count in the 8 weeks after loan "origination" is the same or greater than one of two periods: Jan 1 to Feb 28, 2020 or Feb 15 to June 30, 2019 (your choice on which time period applies); and
-You don't reduce average wages by more than 25%

You get partial forgiveness if the head count falls or wages are reduced by more than 25%.

You really need to read the law yourself and figure out how much you can borrow and how the forgiveness will work in the case of your organization.

You can read the details of the loan program here (start at page 9 of PDF for loan program & calculating your max borrowing amount, see page 41 for loan forgiveness requirements): https://www.documentcloud.org/documents/6819239-FINAL-FINAL-CARES-ACT.html

My view is that the ideal strategy is to lay off people immediately so they can collect unemployment and your organization can hoard cash. Then rehire everyone as soon at the loan is "originated" (whatever that means). My guess is that SBA will need time to set it up and for your local SBA lending bank to get everything in place to process applications. Talk to your local SBA banker now.


See this thread: https://www.dcurbanmom.com/jforum/posts/list/868675.page

This. We own a small business and this is what we are doing.

[Anonymous]

Anonymous wrote:In my research I came across this helpful document:

https://www.uschamber.com/sites/default/files/023595_comm_corona_virus_smallbiz_loan_final_revised.pdf

Thank you - this is fantastic. I've written similar summaries for all my small biz friends, but this is much clearer and easier to understand.

The program has daunting documentation requirements. It will advantage small biz's that have strong accounting standards and are well-organized.

[Anonymous]

Op here - thanks for your help. We aren’t laying off now even though it would preserve cash. We’re a religious non-profit and that is not in line with our values. It seems like FT headcount just has to remain the same at 6/30 which seems like a loophole to me for organizations that are on a 6/30 fiscal year and may decide to reorganize staff (eg discharge someone or make salary reductions). But I guess this money is supposed to get you through the next couple of months to pay operating costs (payroll) through 6/30 and if you have to make painful decisions after that bc things haven’t turned around, they aren’t going to penalize you.

[Anonymous]

Anonymous wrote:Op here - thanks for your help. We aren’t laying off now even though it would preserve cash. We’re a religious non-profit and that is not in line with our values. It seems like FT headcount just has to remain the same at 6/30 which seems like a loophole to me for organizations that are on a 6/30 fiscal year and may decide to reorganize staff (eg discharge someone or make salary reductions). But I guess this money is supposed to get you through the next couple of months to pay operating costs (payroll) through 6/30 and if you have to make painful decisions after that bc things haven’t turned around, they aren’t going to penalize you.

I should have said loophole if the organizations decide to reorganize or make changes to staff comp for FY 2021. But I think I talked myself through that it’s okay to do that if need be.