The Paycheck Protection Program (PPP) while popular, left borrowers and lenders with a great deal of questions. Incremental guidelines from the Small Business Administration (SBA) that is administering the federal funds for COVID-19 relief, the IRS, and most significantly, Congress, have answered some of the most pertinent, but the need for further clarification on provisions remain. Some of the most significant questions involve how loan recipients can have their PPP (or if they access the new funding, PPP2) loans forgiven and what proof of documentation may suffice for those loans to be eligible for forgiveness. Keep in mind that the original rules and guidelines of the PPP are in place unless otherwise revised.
During our recent webinar, Taking Advantage of the New Paycheck Protection Program & Other Stimulus Provisions we received several hundred questions on various components of the PPP and PPP2 program. Below are a sampling of those queries and our team’s responses.
We didn’t use up all of our initial PPP loan. Can the new additional eligible expenses be applied to the original loan?
Yes, the new Covered Expenses (such as cloud computing costs and PPE expenses) can be included in loan forgiveness applications for the original PPP loans.
If we didn’t use up our initial PPP loan, can we add more payroll costs to it?
If you are trying to use up all of the initial PPP loan to access PPP2 funding you will need to use the original PPP loan proceeds before applying for a PPP2 loan. The guidelines don’t say it has to be spent during the Covered Period but the initial funds from your PPP loan need to be spent on eligible expenses.
Do I have to only eligible payroll expenses for loan forgiveness?
You may use a percentage of the loan for non-eligible expenses such as rent, mortgage interest, and utilities but keep in mind that the total loan proceeds should be allocated: a maximum 40% eligible non-payroll expenses and a minimum of 60% eligible payroll expenses. Of note is the clarification in the year-end stimulus law that eligible payroll costs include group life, disability, vision, or dental insurance benefits.
Are guaranteed payments for working owners eligible to be included in the payroll calculations?
If the owners are employees and not just owners, they are eligible. Employee-owners are subject to the maximum compensation of $100,000 annually for the PPP2 just as they were in the original PPP.
Accessing the PPP2
If I returned a portion of my initial PPP loans, can I apply again?
Yes, even if borrowers accessed PPP loans and returned all or a portion of them, they can apply for the First Draw PPP or the PPP2. To be eligible for the PPP2, you must meet the qualifications for PPP2 loans (300 or fewer employees, 25% decline in gross revenue for any quarter or all of 2020 as compared to the same period/year in 2019).
If I could not get full forgiveness of my PPP loan because of my FTE reduction, am I eligible for PPP2?
There is nothing prohibiting you from a second draw PPP2 loan if you meet the eligibility requirements.
What is the Covered Period for the PPP2?
It has not been established yet. As the existing PPP rules and guidelines carry over unless otherwise revised it is expected that the loan forgiveness period for PPP2 loans will remain at 24 weeks.
Is there any information on potential forgiveness of PPP2 loans?
Not yet. The focus is on PPP2 and first draw PPP. The existing PPP rules and guidelines still apply unless otherwise changed so loan forgiveness should be the same as for original PPP loans.
My parent company went public via a SPAC subsequent to PPP1 Am I as the subsidiary still eligible for PPP2?
No, as a part of a public company, you are not eligible for the PPP2.
When calculating the PPP2 loan amount, is there a given time frame to calculate payroll expenses for?
You can choose either the preceding 12 months before you apply; 2019 or 2020 for the average monthly payroll calculation.
Full-Time Equivalents & Loan Forgiveness
Should I calculate headcount as of the end of the Covered Period or Dec. 31, 2020?
You should calculate the headcount at the end of the Covered Period unless the Covered Period goes past Dec. 31, 2020. In that case, you would use Dec. 31, 2020. The end of 2020 deadline was significant because it was the safe harbor for rehiring staff lost due to COVID-19 related downsizing.
What about governmental restrictions on business operations?
Document all governmental restrictions that limited your business operations and/or prevented you from returning your workforce to full, pre-pandemic capacity. Stimulus legislation has specific exceptions for loan recipients who cannot return their headcount because of demonstrated guidance from public health agencies.
At what date do you need to be under the 500-employee threshold?
At the time of the loan application, as per SBA guidelines. Note that “employee” means a single person; it not the same as the definition of FTE used for loan forgiveness calculations.
Two quarters were down by 25% compared to the same quarters in the prior year but the entire year’s gross revenues were not 25% lower. Am I eligible?
All that is required for the gross revenue eligibility is for a single quarter of 2020 to be down 25% or more compared to the same period in 2019.
Is it OK to use a partial quarter? My company was acquired in May 2019, and May/June 2019 gross receipts was more than 25% higher than May/June 2020.
A quarter is defined as three months. You would need to use at least three months of 2020 and have the gross receipts be down at least 25% or more from the same period in 2019.
Could you clarify the guidance on the limit of $4 million per corporate group? How is corporate group defined?
For the purposes of this rule, businesses are in a single corporate group when they are majority owned, directly or indirectly, by a common parent. This is covered by the SBA affiliation rules and the interim final rule for PPP loans.
Can you give more detail on the limits of an affiliate? I’m a hotel company, am I limited to $2 million per hotel?
The second draw PPP maximum loan amount is $2 million. Corporate groups can only borrow a maximum of $4 million.
What happens when I submit the PPP loan forgiveness application?
Your lender will review your PPP loan forgiveness application and submit it to the SBA. The PPP lender has up to 60 days for this review before submitting the application. The SBA has up to 90 days of receipt of the application from the PPP lender to make a decision on PPP loan forgiveness. The SBA will then provide communication about the status of your PPP loan forgiveness, but some borrowers have been informed that the SBA was unable to make the loan forgiveness decision within the 90-day timeframe.
What happens if I receive no or partial loan forgiveness?
PPP loans that are not forgiven accrue at a 1% interest rate and if issued prior to June 5, 2020, have a two-year maturity term. PPP loans issued after June 5 have a five-year maturity. Once full, partial or no loan forgiveness is determined by the SBA, the loan is either forgiven or goes into repayment mode.
If You Have More Questions
For additional questions about the Paycheck Protection Program, please contact us.
Looking for more COVID-19 resources? Visit our resource center for expertise on impacts to expect and how your business can respond.
Jake is a Director for CBIZ MHM, LLC. in the Philadelphia office. He can be reached at
610.862.2202 or firstname.lastname@example.org.
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