PPP loans

jdhu

jdhu

Well-known member
I'm trying to figure out the answers, they are not as forthcoming as I would have thought.

1. For PPP loan forgiveness, the start date so to speak, is Feb 15, correct? So, if you laid off 10 employees on Feb 16, apply for the loan in late April, it's the number of employees you had on Feb 15 that matters, for forgiveness?

2. And, you have until June 30 to re-hire laid off employees, to maximize forgiveness?

3. What if an employee refuses to come back? Some of my clients are saying some employees have made clear they'd prefer to be on unemployment. I know for PPP forgiveness, any laid off employee who is rehired must be off of unemployment, to qualify for forgiveness. Has anyone spoken with a lender and asked what happens if employee refuses to come back, despite good faith attempt to re-hire?

Thanks. I've read the PPP guidelines, multiple attorney blogs, can't figure out #3 especially.
 
jdhu

jdhu

Well-known member
Well, perhaps the answer to my own question is...

If an employee refuses to come back, then you didn't expend money on that employee's pay, hence no need for forgiveness, and you can just return the principal (with interest, of course)?
 
Archimedes

Archimedes

Fire Watcher
In order to qualify for forgiveness, you have to maintain payroll at the level assumed in the loan for a continuous 8 week period starting anytime after 2/15 through (I believe) 6/30.

If you lay anyone off during that period, the forgivable amount is reduced by the portion associate with that position. I doubt rehiring them matters at all.
 
jdhu

jdhu

Well-known member
Archimedes said:
In order to qualify for forgiveness, you have to maintain payroll at the level assumed in the loan for a continuous 8 week period starting anytime after 2/15 through (I believe) 6/30.

If you lay anyone off during that period, the forgivable amount is reduced by the portion associate with that position. I doubt rehiring them matters at all.
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There's a rehiring provision, a company has until June 30 to rehire anyone laid off from 2/15 onwards, which applies to the forgiveness calculation.

It's confusing, but 2/15 is the first date (for # of employee baseline and forgiveness), not the date you obtain the loan, etc.
 
Archimedes

Archimedes

Fire Watcher
jdhu said:
There's a rehiring provision, a company has until June 30 to rehire anyone laid off from 2/15 onwards, which applies to the forgiveness calculation.

It's confusing, but 2/15 is the first date (for # of employee baseline and forgiveness), not the date you obtain the loan, etc.
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I know the clock starts on 2/15, which means any business who got the loan and hasn't fired anyone has already met the threshold for forgiveness as of this week.

I wasn't aware of the rehire provision, but I imagine it still requires that anyone rehired has to be paid for at least 8 weeks in order for that amount to be forgiven.
 
jdhu

jdhu

Well-known member
Archimedes said:
I know the clock starts on 2/15, which means any business who got the loan and hasn't fired anyone has already met the threshold for forgiveness as of this week.

I wasn't aware of the rehire provision, but I imagine it still requires that anyone rehired has to be paid for at least 8 weeks in order for that amount to be forgiven.
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Interesting. Just in case I'm not being clear, what I have in mind is something like a business that has 50 employees on Feb 15, lays 10 off on March 1, and gets a loan on April 22. From what I've researched, the baseline calculation for forgiveness is 50 employees, and the employer has until June 30 to rehire the 10 employees (if full forgiveness is the goal).

Now, if any of those 10 refuse to come back? Another question I have...
 
Archimedes

Archimedes

Fire Watcher
jdhu said:
Interesting. Just in case I'm not being clear, what I have in mind is something like a business that has 50 employees on Feb 15, lays 10 off on March 1, and gets a loan on April 22. From what I've researched, the baseline calculation for forgiveness is 50 employees, and the employer has until June 30 to rehire the 10 employees (if full forgiveness is the goal).

Now, if any of those 10 refuse to come back? Another question I have...
Click to expand...

So I just read the full regs around forgiveness and I had it wrong. I was going off some simple information that was out initially and it's more complex than that. I'm still trying to wrap my head around exactly how we will calculate the amount that's forgivable.
 
bikeama

bikeama

Super Moderator
Staff member
PPP GREED. Can't wrap my head around the LA Lakers being a small business.


"The Los Angeles Lakers received and repaid an approximately $4.6 million Payroll Protection Program loan, a source told CNN.

The L.A. Lakers qualify as a small business because the organization only has 303 part-time and full-time employees.

The organization repaid the loan "within days" of receiving it after realizing that the government's funds had been depleted."
 
Archimedes

Archimedes

Fire Watcher
The SBA clarified the regs around certification of necessity. This sets a much higher bar for ANY business keeping the money and is very different than what was communicated initially.

New Guidance from the SBA on PPP Loan "Necessity Certification"

* New language establishes "necessity" as a critical factor in determining eligibility and good faith:
* “Current economic uncertainty makes this loan necessary to support the ongoing operation of the applicant”
* Applicants should be able to explain to the SBA the basis for the Necessity Certification
* MGO's recommendation is to provide documentation
* Before submitting the application there will be a need to assess “other sources of liquidity”
* “No Fault” return policy by May 7, 2020
 
Climber

Climber

Well-known member
Archimedes said:
The SBA clarified the regs around certification of necessity. This sets a much higher bar for ANY business keeping the money and is very different than what was communicated initially.

New Guidance from the SBA on PPP Loan "Necessity Certification"

* New language establishes "necessity" as a critical factor in determining eligibility and good faith:
* “Current economic uncertainty makes this loan necessary to support the ongoing operation of the applicant”
* Applicants should be able to explain to the SBA the basis for the Necessity Certification
* MGO's recommendation is to provide documentation
* Before submitting the application there will be a need to assess “other sources of liquidity”
* “No Fault” return policy by May 7, 2020
Click to expand...
Is it retroactive to the first pass, or are those big greedy companies free and clear?
 
Archimedes

Archimedes

Fire Watcher
Climber said:
Is it retroactive to the first pass, or are those big greedy companies free and clear?
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It's retroactive, essentially just a clarification supposedly, though I think that's a bit dubious. They also announced that they're going to audit every loan over either $1 million or $2 million, I can't recall which.

The reality is that the revised interpretation, if taken literally, makes little sense. Few of any businesses would pass it in the strictest sense. Further, it would imply a different goal than initially claimed.

Let me give you an example. A small business gets hit hard due to Covid-19, but they can stay in business as long as they cut salaries or lay off some workers. Taken to an extreme level, say the owners aren't willing to lose all the profit, so they'd cut heads to maintain some level of profit for themselves. Technically, they didn't need the loan to survive, but if they got it, they would keep those employees in place and use the money to pay their salaries rather than let them go. Does this company meet the test? Should they get the loan and should they have it forgiven? The initial disclosure would have said yes, but this revised interpretation calls that into question.
 
jdhu

jdhu

Well-known member
Put together an update for my clients, based on new guidance from SBA. These links, in particular the first one, are great.

A couple of new takeaways are that you need not rehire the same employee (for forgiveness calculation; what matters is the number of employees before and after), and for those employees who refuse to come back, you can avoid negative consequences to forgiveness amount by documenting your bona fide effort to bring back the refusing employee.

https://www.jdsupra.com/legalnews/in-depth-loan-forgiveness-under-the-60925/

https://www.marketplace.org/2020/05...ection-program-loan-forgiveness-new-guidance/

https://bench.co/blog/operations/ppp-rehiring-employees/
 
Climber

Climber

Well-known member
jdhu said:
Put together an update for my clients, based on new guidance from SBA. These links, in particular the first one, are great.

A couple of new takeaways are that you need not rehire the same employee (for forgiveness calculation; what matters is the number of employees before and after), and for those employees who refuse to come back, you can avoid negative consequences to forgiveness amount by documenting your bona fide effort to bring back the refusing employee.

https://www.jdsupra.com/legalnews/in-depth-loan-forgiveness-under-the-60925/

https://www.marketplace.org/2020/05...ection-program-loan-forgiveness-new-guidance/

https://bench.co/blog/operations/ppp-rehiring-employees/
Click to expand...
What are the ramifications if the company offers their job back, but at a lower salary?
 
jdhu

jdhu

Well-known member
Climber said:
What are the ramifications if the company offers their job back, but at a lower salary?
Click to expand...

Will count against forgiveness, although from the example calculations, the effect with just a few employees (with pay reduction) is minimal.
 
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