Payroll Protection Program: Relevant Guidance on Forgiveness (Updated 5/15)
Summary
This SBA Houston District slide deck on Payroll Protection Program forgiveness is marked Updated 5/15. Its opening slide summarizes FAQ number 46, a safe harbor under which any borrower receiving a loan under 2 million dollars is deemed to have requested it in good faith. The slide quotes CNBC saying owners who borrowed less than $2 million can breathe a little easier, and Forbes on financial hardship criteria. The remaining slides introduce the Houston District, which covers 32 counties in southeast Texas, and list its counseling, contracting, capital and disaster assistance resources.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
U.S. Small Business
Administration
Payroll Protection Program
Relevant Guidance on Forgiveness
Updated 5/15
PPP ‘Safe Harbor’
5/15 Summary
• Recently published (called FAQ #46) - provides a ‘safe harbor’ when getting a PPP loan.
• Any borrower receiving a loan under 2 million dollars will be deemed to have requested the loan
in good faith.
• It goes on to say, for any PPP loan where the borrower did NOT act in good faith “If the
borrower repays the loan … SBA will not pursue administrative enforcement or referrals to other
agencies …”
• Reactions from the Press:
• CNBC – “business owners who borrowed less than $2 million from the Paycheck Protection
Program can breathe a little easier”
• FORBES – “businesses with a PPP loan under $2 million now automatically fit the SBA
forgiveness criteria with respect to financial hardship”
3
We Hope You Smile!
4
These Slides (and other resources)
www.sba.gov/tx/houston
Follow us on Twitter:
@SBA_Houston
Sign-up for email notifications
5
SBA Introduction
Houston District
32 Counties – SE Texas
4 C’s of SBA
• Counseling
• Contracting
• Crisis
• Capital
Counseling
Resource Partners of the SBA
Texas Gulf Coast WBEA Women’s Business Houston SCORE
Small Business Center (WBC)
Development Center (SBDC)
713-752-8444 713-681-9232 713-487-6565
www.sbdc.uh.edu www.wbea- www.houston.score.org
texas.org/womens-business-
center
10
SBA Resources
For EIDL Loan Applicants Houston District Office - SBA Other SBA District Offices
• 1-800-659-2955 • 713-773-6500 www.sba.gov/about-sba/sba-
• (TTY: 1-800-877-8339) locations
• Houston@sba.gov
• e-mail
disastercustomerservice@sb • Twitter: @SBA_Houston
a.gov
11
Economic Development Team General Topics:
Common Speaking Topics
• How the U.S. SBA Can Help Your Small Business
• Sources of free business counseling for your small
business
• Coordinates our 1,200+ significant • How to Survive a Disaster: SBA disaster assistance and
engagements each year recommended disaster preparation for small businesses
• How to Export / International Trade
• Partners with a wide range of organizations • Veteran Small Business (Start or Grow) Workshops
• Encore Entrepreneurs (Post-Retirement Startups)
• Media relations and social media Capital Access Topics:
• SBA Guaranteed Loans for Small Business
• Speak on a wide range of topic at events from • Alternatives to Bank Lending for Small Businesses
including Crowdfunding, Equity Investment, and more
a handful to 1,000+ • For Construction Firms: Increase Sales via Improved
Bonding
• SBA Financing Panel Presentations
• Federal Innovation Grants (SBIR/STTR Programs)
Federal Contracting Topics:
• Growing your firm by winning Federal contracts
• The SBA 8(a) Business Development program
• HUBZone certification workshop
• Women-Owned Business certification
• How to Conduct Market Research Using FPDS
Contracting
Federal Contracting /
Business Opportunity Team
• Help Americans grow their businesses
• Special training and certification
• Access to federal contracts
• Support with state and local contracts
Average
Business Type Amount Number Transaction
Small Business $ 824,132,874 1,035 $ 796,264
Small Disadvantaged $ 211,481,926 558 $ 379,000
8(A) $ 23,910,367 44 $ 543,417
Veteran $ 86,890,441 113 $ 768,942
Service Disabled Veteran $ 70,126,613 73 $ 960,639
Women Owned $ 162,527,792 684 $ 237,614
HUBZone $ 17,927,981 15 $ 1,195,199
Capital
Lender Support Team
FY19 Capital Assistance
Dollars Units Average
504 $76,910,000 66 $1,165,303
7A $846,663,000 1191 $710,884
Surety Bonds $125,672,305 222 $566,091
Micro Loans $424,479 33 $12,863
Grand Total $ 1,049,669,784 1512 $734,744
16
Crisis
Disaster Lending
• Provide direct loans from the government to assist homeowners
and any size business or non-profit
• Provide technical assistance to help businesses recover
Hurricane Imelda Hurricane Harvey
Home 601 $31,385,600 Home 39,653 $2,957,258,600
Business/EIDL 14 $617,500 Business/EIDL 3,906 $450,093,700
TOTAL 615 $32,003,100 TOTAL 43,559 $3,407,352,300
• SBA Express Lenders – Disaster Bridge Loans up to $25K
COVID-19 Lending
Dollars Units
PPP 1 (finished) $350Bn 1.66M
PPP 2 (in progress) ~$200Bn 2.65M
EIDL (on hold) unk 5M applications
EIDL Advances (as of 4/24) $4.8M 1.2M
PPP Forgiveness
References and Some Basic Information
Payroll Protection Program
Forgiveness
All references are from the following documents:
1. Official Guidance
https://www.sba.gov/document/policy-guidance--ppp-interim-final-rule
2. Paycheck Protection Program Fact Sheet for Borrowers
https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf
3. Paycheck Protection Program FAQs
https://www.sba.gov/document/support--faq-lenders-borrowers
4. The CARES Act
https://www.congress.gov/bill/116th-congress/house-bill/748/
5. Disbursement Guidance
https://home.treasury.gov/system/files/136/Interim-Final-Rule-on-
Disbursements.pdf
6. Supplemental Official Guidance of 4/20
https://www.federalregister.gov/documents/2020/04/20/2020-
08257/business-loan-program-temporary-changes-paycheck-protection-
program-additional-eligibility-criteria
Full Time Equivalents (FTEs)
(from FAQs)
• … for purposes of loan forgiveness, the CARES Act uses the standard of
“fulltime equivalent employees” to determine the extent to which the loan
forgiveness amount will be reduced in the event of workforce reductions.
What is ‘Payroll Cost’
III 2 ii f
Payroll costs consist of
• compensation to employees (whose principal place of residence is the United States) in the form
of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on
employer records of past tips or, in the absence of such records, a reasonable, good-faith
employer estimate of such tips);
• payment for vacation, parental, family, medical, or sick leave;
• allowance for separation or dismissal;
• payment for the provision of employee benefits consisting of group health care coverage,
including insurance premiums, and retirement;
• payment of state and local taxes assessed on compensation of employees;
• and for an independent contractor or sole proprietor,
• wage, commissions, income, or net earnings from self-employment or similar compensation.
How to Calculate PPP Loan Amounts?
III 2 ii e
How do I calculate the maximum amount I can borrow?
The following methodology, which is one of the methodologies contained in the Act, will be most useful
for many applicants.
Step 1: Aggregate payroll costs (defined in detail below in f.) from the last twelve months for employees
whose principal place of residence is the United States.
Step 2: Subtract any compensation paid to an employee in excess of an annual salary of $100,000 and/or
any amounts paid to an independent contractor or sole proprietor in excess of $100,000 per year.
Step 3: Calculate average monthly payroll costs (divide the amount from Step 2 by 12).
Step 4: Multiply the average monthly payroll costs from Step 3 by 2.5.
Step 5: Add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January
31, 2020 and April 3, 2020, less the amount of any “advance” under an EIDL COVID-19 loan (because it
does not have to be repaid).
When Does The 8-Week Period Start
From April 20 supplemental guidance III 1 a
• The lender must make a one-time, full disbursement of the PPP loan within ten calendar days of
loan approval
• For the purposes of this rule, a loan is considered approved when the loan is assigned a loan
number by SBA.
• … lenders are not responsible for delays in disbursement attributable to a borrower’s failure to
timely provide required loan documentation, including a signed promissory note.
• Loans for which funds have not been disbursed because a borrower has not submitted required
loan documentation within 20 calendar days of loan approval shall be cancelled by the lender
Details on Forgiveness
How Much Can Be Forgiven?
Section III 2 ii o (also in III, III 2 ii t v)
Can my PPP loan be forgiven in whole or in part?
• Yes. The amount of loan forgiveness can be up to the full principal amount of the loan
and any accrued interest.
• The actual amount of loan forgiveness will depend, in part, on
• the total amount of payroll costs,
• payments of interest on mortgage obligations incurred before February 15, 2020
• rent payments on leases dated before February 15, 2020
• utility payments under service agreements dated before February 15, 2020,
• over the eight-week period following the date of the loan.
• However, not more than 25 percent of the loan forgiveness amount may be
attributable to non-payroll costs.
Again… How Much Forgiven?
From the Fact Sheet entitled “PAYCHECK PROTECTION PROGRAM (PPP) INFORMATION SHEET: BORROWERS”
How much of my loan will be forgiven? You will owe money when your loan is due if you use the
loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments
over the 8 weeks after getting the loan… not more than 25% of the forgiven amount may be for
non-payroll costs.
You will also owe money if you do not maintain your staff and payroll.
• Number of Staff: Your loan forgiveness will be reduced if you decrease… headcount.
• Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages
by more than 25% for any employee that made less than $100,000 annualized in 2019.
• Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels
for any changes made between February 15, 2020 and April 26, 2020.
Re-hiring Employees
FAQ #40
• Will a borrower’s PPP loan forgiveness amount … be reduced if the
borrower laid off an employee, offered to rehire the same employee, but
the employee declined the offer?
• (We)… intend to issue an interim final rule excluding laid-off employees
whom the borrower offered to rehire (for the same salary/wages and
same number of hours) from the CARES Act’s loan forgiveness reduction
calculation… to qualify for this exception, the borrower must have made
a good faith, written offer of rehire, and the employee’s rejection of that
offer must be documented by the borrower.
• Employees and employers should be aware that employees who reject
offers of re-employment may forfeit eligibility for continued
unemployment compensation
29
Requesting Forgiveness
(III 2 ii t, iv) Documentation verifying the number of full-time equivalent employees on payroll as
well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent
payments, and covered utilities for the eight week period following this loan will be provided to the
lender.
(From FAQ) … The request will include documents that verify the number of full-time equivalent
employees and pay rates, as well as the payments on eligible mortgage, lease, and utility
obligations. You must certify that the documents are true and that you used the forgiveness amount
to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must
make a decision on the forgiveness within 60 days
(4/20 Supplemental Guidance III 1 g ) … submit Form 941 and state quarterly wage unemployment
insurance tax reporting forms or equivalent payroll processor records that best correspond to the
covered period (with evidence of any retirement and health insurance contributions).
The Lender’s Role with Forgiveness
III 3 c, What do Lenders Need to Know and Do
Can lenders rely on borrower documentation for loan forgiveness?
• Yes. The lender does not need to conduct any verification if the borrower submits
documentation supporting its request for loan forgiveness and attests that it has
accurately verified the payments for eligible costs.
• The Administrator will hold harmless any lender that relies on such borrower documents
and attestation from a borrower.
• … lender reliance on a borrower’s required documents and attestation is necessary and
appropriate in light of section 1106(h) of the Act, which prohibits the Administrator from
taking an enforcement action or imposing penalties if the lender has received a borrower
attestation.
… Stay Tuned…
Section III 2 ii o
SBA will issue additional guidance on loan forgiveness.
A Simple Example
Simple Example
Obtained from hours worked or full-
Average FTE 10 time salaried employees
12 Month Payroll $120,000 Obtained from your payroll records
34
Simple Example
Obtained from hours worked or full-
Average FTE 10 time salaried employees
12 Month Payroll $120,000 Obtained from your payroll records
Average Monthly Payroll $10,000 (12 Month Payroll / 12 months)
35
Simple Example
12 Month Payroll $120,000 Obtained from your payroll records
Obtained from hours worked or full-
Average FTE 10 time salaried employees
Average Monthly Payroll $10,000 Monthly payroll / 12 months
Loan Amount $25,000 Average Monthly Payroll * 2.5
- Amount for payroll (75%) $18,750
- Amount for Rent,
Mortgage Interest, and
Utilities $6,250
36
From Texas Citizens Bank
Guidance To Their Clients
PPP Do’s & Don’ts
Texas Citizens Bank
38
PPP Do’s & Don’ts
Texas Citizens Bank
39
PPP Do’s & Don’ts
Texas Citizens Bank
40
… and speaking of fraud…
• Things Get Real For Reality TV Star • Texas Toast: Business Owner Obtains $10
Million To Pay 250 Employees But Evidently Has
• Georgia, federal prosecutors charged a well-known No Employees
figure on reality TV with bank fraud.
• The man “allegedly sought $10 million in PPP loan
• In addition to his television work, the man is also the proceeds by fraudulently claiming to have 250
sole owner of a Georgia company with “107 employees… employees with an average monthly payroll of $4
• The loan amount he received was slightly over $2 million.”
million. • The Texas Workforce Commission has no records of
• He “allegedly used more than $1.5 million of the PPP employee wages paid in 2020 by the accused or his
loan proceeds to purchase $85,000 in jewelry, including business.
a Rolex Presidential watch, a diamond bracelet, a 5.73 • They even searched his trash. In garbage outside the
carat diamond ring for himself, and to pay $40,000 for man’s residence, they found “handwritten notes that
child support.” appear to reflect an investment strategy for the $3
• Stating what seems obvious to most PPP loan applicants, million, which is the amount of money that [he]
the DOJ points out that “such payments are not an allegedly sought from the second lender.”
authorized use of PPP funds under the CARES Act.”
• May 11, when “agents executed a search...and seized
approximately $80,000 in cash, including $9,400 that
[he] had in his pockets… and further discovered a 2019
Rolls-Royce Wraith, which still had a temporary dealer
tag on it.”
From FORBES magazine online
41
Frequently Asked
Questions
PPP Forgiveness
Hiring / Re-Hiring
1. How soon do I have to rehire my employees?
2. Do all employees need to return at the same time, or can some stay on unemployment
for a while?
3. What if we have someone doesn’t come back until after the 8-week period has started?
How we do we include them?
4. We haven’t yet had a staff reduction. Do we have to maintain staff thru June 30th? Or,
just the eight-week period?
43
Using the PPP Funds (1 of 2)
1. Can I pay any of my employees more than they normally make, or for more
hours than they normally work?
2. Can I pay all of the payroll to my employees as a lump sum at one time?
3. Can I include part time employees in the forgiven wages?
4. Let’s say I receive $850K for the PPP and after 8 weeks I only use $600K. Will the
$250K balance become a loan (at 1% for 2 years), or must I return it to the bank?
44
Using the PPP Funds (2 of 2)
1. If an employee chooses to stay on unemployment, or not come back at all, do I
just send their portion back to the bank, or can I disburse their portion to the
rest of the employees?
2. We processed payroll the day that we received the loan. Paychecks included the
week before disbursement of the loan. Are those payments from the week
before eligible for forgiveness even though we were paying staff wages accrued
during the prior week?
45
‘Assorted’
1. How will an FTE be calculated? Can we take our total payroll hours each pay period (in
our case we pay biweekly so it's 2 weeks/80 hours) for the 2 baseline option periods we
can choose from and divide by 80 hours to get the FTE?
2. What documents do I submit to properly document forgiveness?
3. I own two companies. One (that received PPP funds) rents the property from the other
under contract. Since these entities have common ownership, will the rent payment be
allowed?
4. I am a sole proprietor. I am not part of the normal payroll; instead, I calculate my
distribution at the end of the month after all expenses. How do I document these
distributions so they will be forgiven?
46
‘Miscellaneous’
1. Is there a ‘safe harbor’ for businesses that use PPP funds for their businesses?
2. Will this webinar content change?
3. When will there be more relief funds (PPP or EIDL or other)?
47
SBA’s Resource Partners
Texas Gulf Coast WBEA Women’s Business Houston SCORE
Small Business Center (WBC)
Development Center (SBDC)
713-752-8444 713-681-9232 713-487-6565
www.sbdc.uh.edu www.wbea- www.houston.score.org
texas.org/womens-business-
center
For EIDL Loan Applicants Houston District Office - SBA Other SBA District Offices
• 1-800-659-2955 • 713-773-6500 www.sba.gov/about-sba/sba-
• (TTY: 1-800-877-8339) locations
• Houston@sba.gov
• e-mail
disastercustomerservice@sb • Twitter: @SBA_Houston
a.gov
48
These Slides (and other resources)
www.sba.gov/tx/houston
Follow us on Twitter:
@SBA_Houston
Sign-up for email notifications
49
Don’t Forget to Smile!
50
U.S. Small Business
Administration
File and source
- File
- PPP_Forgiveness_May_15_ver_1_002.pdf
- Size
- 1,200,651 bytes
- SHA-256
- 17aeef651bd984c2afa1cb21ab3c328c56324a587929a7d04b6f6484d29b708f
- Original
- www.sba.gov