PPP Loans: Round 2
The Small Business Administration (SBA) reopened the Paycheck Protection Program (PPP) effective January 11, 2021. Banks are accepting applications through March 31.
Businesses that did not apply for and receive a PPP Loan last year can apply for a First Draw Loan. Businesses who previously received a PPP Loan can apply for a Second Draw Loan.
The same general loan terms apply to both First Draw and Second Draw Loans.
As with last year’s loans, funds can be used to fund payroll costs (including benefits), mortgage interest, rent, and utilities. Additionally, funds can now be used to pay for worker protection costs related to COVID-19, uninsured property damage costs caused by vandalism or looting during 2020, and certain supplier costs and operating expenses.
For more information about PPP Loans:
- Overview of First Draw Loans and Second Draw Loans
- Calculating First Draw Loan Amounts and Required Documentation
- Calculating Second Draw Loan Amounts and Required Documentation
- FAQs about PPP Loans
- Myths vs. Facts about PPP Loans
- PPP Application Form First Draw and Second Draw (useful for reviewing before completing the form on your bank’s online portal)
- Forgiveness application
Need Help Tracking Expenses for Your PPP Loan?
We Have an Awesome Tool to Help!
We know that this a very challenging time for small businesses, and we are working diligently to assist and support our clients during this pandemic.
PayPlus recently licensed a robust PPP Forgiveness Tool to help business owners track accurate expenses for their PPP loans. We are making this tool available to our clients and others.
The tool calculates payroll and utility expenses and accounts for such matters as Covid-19 sick pay, the $100K salary cap, and EIDL grants that are factored into loan forgiveness.
While the tool itself is easy to use, we are also offering a half hour of training to get you started.
Watch this video (3.5 minutes) to see the software in action.
To purchase a license, go to PayPal.Me/PayPlusLLC, log in to your PayPal account, and enter the payment. Or email us and we will send you an invoice that you can pay through PayPal with any major credit or debit card, even if you don’t have a PayPal account.
Pricing (one-time fee, includes training):
- CPAs, banks, and others who would like to license the software to their clients: $395
- Businesses for their own use: $295
- PayPlus clients: $150
Everything You Wanted to Know about PPP Loans but Were Afraid to Ask
We just prepared an exhaustive compilation of questions and answers about PPP loans, including details about the loan forgiveness program. You can read it here. (Updated 6/17/2020 in accordance with The Paycheck Protection Program Flexibility Act, signed into law 6/5/2020.)
The SBA revised the full forgiveness application to comply with the PPP Flexibility Act. The SBA also published a new EZ version of the forgiveness application that 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 requires fewer calculations and less documentation for eligible borrowers. Details regarding the applicability of these provisions are available in the instructions to the new EZ application form.
Both applications give borrowers the option of using the original 8-week covered period (if their loan was made before June 5, 2020) or an extended 24-week covered period. These changes will result in a more efficient process and make it easier for businesses to realize full forgiveness of their PPP loan.
Click here to view the EZ Forgiveness Application.
Click here to view the Full Forgiveness Application.
Webinar: You have a PPP loan. What’s next?
Watch the webinar that Leslie Costigan hosted on May 13 about what you need to know to get your PPP loan forgiven.
Record-Keeping and Documents for PPP Loan Forgiveness
PPP loans are not automatically forgiven after the eight-week loan period. You have to apply for forgiveness. You apply for forgiveness with the same bank that approved the loan. Along with the forgiveness application, you will need to provide supporting documentation.
Good record-keeping and bookkeeping will be critical for getting your loan forgiven—you’ll need to keep track of eligible expenses and their accompanying documentation over the eight weeks. Your lender will likely require these documents in digital format, so take the time to scan any paper documents and keep backups of your digital records.
These are the required documents you will need to collect to submit with your PPP forgiveness application. Your lender may have additional requirements.
Documents for Payroll Expenses
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 reports from your payroll provider. These are the Payroll Summary and Payroll Detail reports we send you every pay period.
- Payroll tax filings (Form 941). These are the quarterly tax returns we file for you at the end of every quarter. You received printed returns in the mail in 2019 and by email for 2020. The quarterly reports for Q2 will be prepared the first week of July.
- Income, payroll, and unemployment insurance filings from your state. This information is also included in your quarterly tax filings.
- Documents verifying any retirement and health insurance contributions. You can find this information under Deductions on the payroll reports if you pay these expenses through payroll. Otherwise, you will need to provide proof of retirement fund matching through your fund’s statements and health insurance payments through statements from your health insurance provider.
If you misplaced or deleted the payroll reports or tax returns, your Payroll Specialist can generate them for you again, for an additional fee per report. If you use Employer On The Go, you can run missing reports in the Report Wizard yourself.·
Documents for Utility Expenses
Documents verifying your eligible interest, rent, and utility payments. Save and scan canceled checks, payment receipts, and account statements.
Need Help Tracking Expenses?
Here is a sample spreadsheet you can use for tracking expenses.
Resources for Small Businesses
- Coronavirus Aid, Relief and Economic Security Act (CARES Act). Offers $2 trillion economic stimulus package including grants up to $10,000 and loans up to $10M with 6 month of payments waived
- IRS Coronavirus Tax Relief
- SBA Coronavirus Loan Resources
- SBA Express Bridge Loans and Express Bridge Loan Pilot Program Guide
- US Department of Labor Coronavirus Resources
- Nashoba Valley Chamber of Commerce (more resources listed here)
- FEMA Coronavirus Rumor Control
PPP Loans and the Employee Retention Credit
We are delighted to hear that several of our clients have received approval of PPP loans.
We want to keep you up-to-date on the relief programs available to employers.
Two provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act intended to enable employers to keep employees on the payroll are the Paycheck Protection Program (an SBA-guaranteed loan) and the Employee Retention Credit (a payroll tax credit).
You cannot take advantage of both.
Here is a chart comparing the two programs.
To decide which program is right for you, consider the following:
- Your eligibility
- How many employees you have
- How much you are eligible for under both relief measures
- What you need funds for
We are unable to advise on these topics as they are outside the scope of our expertise. We encourage you to follow the IRS Coronavirus Tax Relief page and the SBA Coronavirus Loan Resources page, as well as consult with your tax professional or financial advisor.
How do these programs sync with the FFCRA for employee sick leave or PFML?
The Families First Coronavirus Response Act (FFCRA) lets employers who provide coronavirus paid leave receive a tax credit for the amount of the paid leave wages.
You can apply for the Paycheck Protection Program loan and claim the FFCRA paid leave credit. You can also claim both the Employee Retention Credit and the paid leave tax credit.
However, you cannot double-dip.
If you choose to take the Employee Retention Credit and the paid leave credits, you can’t claim those credits on the same wages. Because you can only claim the paid leave credits on paid leave wages, you cannot claim the Employee Retention Credit on FFCRA paid leave wages.
And if you receive a Paycheck Protection Program loan and claim paid leave credits, the paid leave wages do not count as eligible “payroll costs” under the PPP’s loan forgiveness. Because you claim the paid leave credit on FFCRA paid leave wages, do not count FFCRA paid leave wages as payroll costs when asking for PPP loan forgiveness.
Here is a guide for small businesses about the loan program.
Approved for PPP Loan? Critical Next Steps
We don’t need to tell you what a challenging time this has been for all small businesses. In addition to the health concerns for our families, employees, and co-workers, we have all had to consume a dizzying amount of information about new programs designed to help small businesses survive.
At PayPlus, we have assisted many of you, providing reports, tax returns, and other information to help you complete your applications for the PPP Loans.
Now is the time to think about your next steps.
The PPP program has the potential for the loan to be fully forgiven, provided you use the funds appropriately over the first 8 weeks.
The loan forgiveness is not automatic. You need to apply for forgiveness and provide documentation to back up your claim that the funds were used for approved expenses.
Your 8-week countdown starts from the day you are funded. If you were funded, April 17th, your measurement period ends June 12, 2020.
How you use the funds during this 8-week period determines how much, if any, of your loan will be forgiven. The first test is whether you spent at least 75% of the funds on payroll. The remaining 25% can be used on rent and utilities. What constitutes “utilities” is still open for clarification. Your bank can advise you what utilities are acceptable.
We strongly advise you to keep accurate records, because you will need to account in extreme detail how you use the loan funds.
Every bank has different requirements for what records to keep. We strongly encourage you to review those requirements now and to start collecting the records and receipts now.
Some banks require a separate bank account for depositing the PPP funds. If so, do not use that account to pay for expenses that do not qualify for forgiveness, such as dues or advertising.
If you are setting up a new bank account, we must have a new ACH form signed by you, and a voided check submitted to PayPlus. The change form needs to be submitted at least 3 days prior to your check date.
If you are not maintaining a separate bank account, set up a spreadsheet or work with your bookkeeper to track your expenses.
FAQ about PPP Loans
We have been getting questions from clients who have received PPP loans about how to proceed. We put together this list of frequently asked questions to help answer your questions.
Will my PPP loan be forgiven?
The PPP program has the potential for the loan to be fully forgiven, provided you use the funds appropriately over the first 8 weeks. The loan forgiveness is not automatic. You need to apply for forgiveness and provide documentation to back up your claim that the funds were used for approved expenses.
Do I need to change banks for depositing PPP funds?
Only if your PPP loan is through another bank and that bank requires you to transfer your account. If you are not required to change banks, we strongly recommend that you do not.
I’m not changing banks, but do I need to have a separate bank account for depositing PPP funds?
Some banks require a separate bank account for depositing the PPP funds. If so, do not use that account to pay for expenses that do not qualify for forgiveness, such as dues or advertising. This is an imperfect system: because it is not possible to split up your payroll between wages, taxes, and fees, you will need to keep close track of your expenses. You will be paying those non-eligible taxes out of the PPP fund account, but you will not be able to apply them to the loan. If you are not maintaining a separate bank account, set up a spreadsheet or work with your bookkeeper to track your expenses.
What should I do if I am setting up a new bank account?
If you are setting up a new bank account, we must have a new ACH form signed by you, and a voided check submitted to PayPlus. Do not send the form to NatPay even though that’s what the form says. Send it to your Payroll Specialist and we will submit it for you. You must submit the change form at least 3 days prior to your check date.
I would like to change banks just for the 8-week period of the PPP loan. Is that possible?
Yes, it is possible but not recommended unless the bank requires you to do so. It is your responsibility to send us a new ACH form and voided check at the end of the 8 weeks (at least 3 days prior to your check date) and to ensure that you have sufficient funds in the account. If your payroll bounces due to insufficient funds because you used up the PPP funds, you will need to pay the NSF (insufficient funds) fee.
What if I just add a bank account instead of changing the account?
At least 3 days before your check date, send us a signed ACH form to authorize the change. You are responsible for ensuring that you have sufficient funds in the account. If your payroll bounces due to insufficient funds, you will need to pay the NSF (insufficient funds) fee.
How can I use the PPP funds?
How you use the funds during this 8-week period determines how much, if any, of your loan will be forgiven. You must spend at least 75% of the funds on payroll. The remaining 25% can be used on rent, utilities, and mortgage interest in addition to the employer-paid match from a 401k or SIMPLE IRA plan. What constitutes “utilities” is still open for clarification. Your bank can advise you what utilities are acceptable.
Where can I get a breakdown of taxes, invoice fees, etc?
You can get yourpayroll expenses from the payroll reports you receive each pay period. If you use Employer on the Go, you can generate the reports yourself from the Report Wizard. Save those records now and so you won’t have to scramble to get them in June or July.
What records should I keep?
You will need to keep accurate payroll reports and invoices from rent and utilities. We strongly advise you to keep accurate records, because you will need to account in extreme detail how you use the loan funds. Every bank has different requirements for what records to keep. Review those requirements and start collecting the records and receipts now.
Will PayPlus keep track of my PPP expenses for me?
No. This is your responsibility. Work with your bookkeeper, who will have your rent and utilities expenses (which we do not) to track eligible PPP expenses.
When does the loan countdown start?
Your 8-week countdown starts from the day you are funded (receive the PPP funds). If you were funded on April 17th, your measurement period ends June 12, 2020. The 8-week deadline goes by the check date (pay date), not the pay period.
Can I use loan funds after the 8-week period?
No. You must spend those funds by the end of the 8 weeks.
What should I do if my pay cycle does not coincide with the end of the 8-week period?
If your pay cycle does not coincide with the end of the 8-week period, we can run an extra payroll (at the usual fee) or we can double up entries on your last payroll. We cannot include any payroll that is dated after the 8-week period.
Will PayPlus keep track of the 8-week period for me?
No, this is your responsibility. Our clients are all on different schedules for when they received PPP funds, and we do not have that information.
What payroll-related expenses can be applied to the loan?
You can include gross wages, MA SUTA, MA Health, and other state unemployment taxes. You can also include the employer match on 401K or Simple IRA benefits. You cannot include other taxes (federal, FICA, Medicare, PFML) or the payroll processing invoice fee.
Are there any limits for paying an individual employee with PPP funds?
Yes. The maximum pay for any one employee over the 8 weeks is $15,384.64. This is calculated based on 8 weeks of pay for an employee earning $100,000/year. The $100,000 was the cap used in the loan calculation. This $100,000 limit applies to any one employee’s annual pay, not your total payroll.
My employees have filed for unemployment. How does that affect my PPP loan?
You cannot use PPP funds to pay an employee for the same week they are collecting unemployment. PPP is an acronym for Paycheck Protection Program; it is intended to provide funds to keep employees on the payroll and off the unemployment rolls.
Now that I have PPP funds, I will re-activate employees I furloughed. How do I do that?
Submit a New Hire/Change form to your Payroll Specialist for each employee you furloughed so that we can re-activate them in our system.
Here is a guide for small businesses about the loan program.