Also by Reinvestment Fund

Paycheck Protection Program

Reinvestment Fund is an authorized SBA 7(a) lender and is participating in the Paycheck Protection Program. The Paycheck Protection Program (PPP), authorized under the Coronavirus Aid, Relief, and Economic Securities (CARES) Act, provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. Reinvestment Fund is no longer taking applications to our PPP program.

If you’ve received a PPP loan through our program, we are pleased that we could connect you with helpful resources in this difficult time. Information on this page will help us work together to support your business and prepare you for the loan forgiveness process.

Preparing for PPP Loan Forgiveness


We expect the Small Business Administration (SBA), the federal agency which sets the rules of the program, to continue to release details in the coming weeks on the forgiveness process and we will share any information as we receive them.

The SBA shared an initial set of instructions for forgiveness for its PPP loans last week. Based on these instructions, Reinvestment Fund has updated our FAQ section below. This initial information on the process will help you prepare for how to proceed. It is important that you follow instructions carefully so that your loan balance may be forgiven in 8 weeks. To help further, we are sharing this “how to” guide prepared by FMA.

Meanwhile, please check this page frequently as we will continue to update information as it is received. We will also host webinars in the coming weeks to answer questions and share details on the forgiveness instructions. The first of these webinars was on Friday, May 15. You can access a recording of that webinar at: bit.ly/PPPLendingWebinar515.

We are also keeping our PPPHelp@reinvestment.com email address open.  If you have questions, please send us a message, and our staff will get right back to you.

FREQUENTLY ASKED QUESTIONS

updated May 15, 2020

The responses to frequently asked questions are organized in the following categories:

GENERAL QUESTIONS


Do I have to spend the money I got from PPP right away?

You have 8 weeks from the date you received your money to spend it.  Anything you haven’t spent by that point won’t be forgiven and will have to be paid back over the remaining term of your loan.

What can I spend the money from PPP on?

The most important component of achieving forgiveness on your loan is spending it on payroll.  At least 75% of your loan amount must be spent on payroll to be forgiven.  You can spend more than 75% on payroll if you want, but you can’t spend less.  Whatever you don’t spend on payroll can(must?) be spent on utilities, rent, and/or interest on mortgages that you had in place before February 15, 2020.  At this time, those are the only eligible costs beyond payroll for the use of PPP funds.

My business is closed. Do I still need to rehire staff I have laid off or furloughed since February?

You must at least try.  If you’ve laid people off since February 1, 2020, try to rehire them as quickly as possible, and put your offer in writing so it’s a record.  Email is fine!  You should offer to rehire any laid off or furloughed employees at their pre-COVID wages and hours.   If they decline, either because they do not want to return to work or because they are earning more through Unemployment, you will not be penalized.  However, if you have not offered to rehire, your ability to have your loan forgiven could be reduced.

Do I have to document all my expenses related to how I spent the PPP money?

Yes!  Make sure you’re carefully documenting how you are spending the PPP funds.  Keep records of payroll paid, hire offers extended and accepted or declined, rent, loan interest, and utilities payments.  Records include: receipts, bank statements, payroll register statements, etc. Put them all into a safe, accessible place where you can easily find what you need when it comes time to submit for forgiveness. We will ask you for these records later, and we will only want electronic copies that can transmit over email or our secure system.

Some of our staff were 1099 employees. Can we use PPP funds to rehire them?

Yes, you can – so long as you hire them as W2 employees and not as 1099s.  That would effectively increase your headcount and payroll, and there is no restriction against that.  Just remember that your PPP loan amount was based on your non-1099 payroll pre-COVID, so you likely won’t have enough cash to pay your previous employees AND your 1099s, so you’ll need to be sure you have other sources of cash to supplement PPP to cover everyone.

QUESTIONS ABOUT BACK PAY


Some of our staff were working during the past couple of months without pay based on a promise that our company was going to pay them as soon as the PPP loan came through? Can we use the PPP loan proceeds to back pay these employees?

So long as that work occurred after 2/15 and you can document the hours worked and the payment owed, yes.

My business was open throughout the closedown, but for very limited hours and with a 80% drop in sales. Can I use the PPP funds for the payroll I paid in March and April, or it has to start with the payroll after I received the funds?

If you have already paid the March and April obligations, you pay only existing unpaid payroll or additional payroll accrued going forward with the PPP Loan.

QUESTIONS ABOUT WHAT COUNTS AS PAYROLL


Will the amount paid for employer payroll taxes and to the payroll company for payroll processing fees be included in the 75% minimum spent towards salaries?

The same payroll taxes that were excluded for the purpose of calculating your PPP loan amount will be excluded for calculating forgiveness, and the same taxes that were included for the loan amount calculation will be included for the purpose of calculating forgiveness.  Essentially, this means that the employer’s share of FICA taxes will be excluded, but state and local payroll taxes will be included.  Processing fees are not currently included by the SBA as an eligible expense.  If there is additional guidance on this, we will let borrowers know.

Can everything in the employee’s paycheck be used for the PPP or should anything not be included in the total?

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.

For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the covered period, capped at $15,385 per individual.  Also excluded is Qualified sick or family leave for which a credit is allowed under §7002 or §7004 of the FFCRA, payments to independent contractors and compensation of an employee whose principal place of residence is outside the US.  The employer’s share of FICA taxes should be excluded.

Will Admin fees to third parties who manage HRA Plans as well as HRA expenses (we pay the $1500 Care First Deductible for staff on the plan) count as payroll expenses?  Do Health Insurance Premiums or third-party Admin fees for our 401k plan-do those count as payroll expenses?  What about the amount paid to the 401k for Profit Share in March 2020 before we knew the pandemic was coming? Can we pay for AFLAC and Legal Shield Policies that staff usually pay as deductions from their pay for Cancer or disability or life insurance policies and count that to payroll expenses?

Generally, any compensation that represents a benefit to your employee can be counted – which would include paying deductibles for staff, or paying for supplemental insurance policies.  At this time, third party fees that the employer typically pays like administrative costs for payroll processing cannot be counted, nor can expenses for things like liability insurance that protect the company not the employee.  There is no specific guidance as to whether previously incurred and paid expenses like a 401k profit share payment could be included.  To be safe, we would recommend not counting it for now.  If there is additional guidance from SBA on this, we will let borrowers know.

How often in the eight weeks do we send in paperwork?  Do we send you payroll journals showing who was paid every two weeks of the eight week period?

The SBA has not given us guidance on what we will need to submit for forgiveness yet, so we are not yet collecting any documents.  Please keep these kinds of records on file and we will communicate in the future what documents we need to receive and when to submit them.

QUESTIONS ABOUT RE-HIRING STAFF


None of my employees are comfortable to go back to having customers inside the shop, but we will do our best to expand the door service hours and menu, so I can hire my people as close to the hours they had before. Can I still file for unemployment for those I keep on payroll that qualify?

If you have received a PPP loan and want to maximize your forgiveness benefit you are required to offer your employees their positions back at comparable hours/wages.  If they decline this offer for any reason, your forgiveness will not be compromised, but their eligibility for unemployment might be (unfortunately, while SBA guidance suggests that unemployment compensation might be affected for employees who are offered the opportunity to return and decline it, we have not seen specific guidance on whether this is going to be implemented, or under what circumstances).  Conversely, if you choose not to offer all your employees the opportunity to return, the amount of forgiveness for which you are eligible might be reduced.  Note, though, that forgiveness calculations will be based on Full Time Equivalent employees as of the end of June compared to your pre-COVID payroll, so if you have replaced previous employees with different employees working similar hours and wages, you would not be penalized.

Will the measuring stick for the payroll portion of loan forgiveness be based on head count/number of employees, total amount spent on payroll compared to average payroll amount/ payroll report dollar amounts, or FTE/ hours of payroll?

The forgiveness formula will be based on BOTH FTEs/hours of payroll AND total amount spent on payroll, as well as employee compensation levels.  If you do not spend 75% of your PPP loan on payroll, your maximum forgivable amount will be adjusted down to whatever percentage of the 75% goal you have met. So if you have a $100k loan and you have only met half of the 75% goal (you spent 37.5% of your loan on payroll) your maximum forgivable amount would be half of your loan, or $50k. At the same time, if you reduce your FTEs relative to your pre-COVID levels, your maximum forgivable amount would be reduced proportionally. So if you have a $100k loan but you reduced your FTEs by 50% your maximum forgivable amount would become $50k.  Note, however, that a number of “safe-harbors” apply to the FTE reduction requirement.  If you have laid off employees and offer them their position back and they decline, you will not be penalized.  Likewise, if you have to fire an employee for cause, or in an employee voluntarily resigns or requests a reduction in hours you will not be penalized.  For more detailed information on the forgiveness calculation, see the most recent forms and guidelines posted by the SBA at: https://www.sba.gov/document/sba-form–paycheck-protection-program-loan-forgiveness-application

According to Section (H) (iii) of the PPP promissory note, we have agreed to “restore not less that 90% of its workforce that existed on February 1, 2020 and restore all compensation and benefits to the Borrower’s employees no later than 3 months after the termination date of the public health emergency declared by the Secretary of HHS.”  Is the February 1st headcount the official date to use to determine the 90%?  Regardless of which date or method of calculation is used is 90% the official % to reach for full forgiveness?

Regardless of the language in the Note, we have now received updated guidance from the SBA on what “reference period” may be utilized to calculate the baseline number of employees borrowers will be tested against to determine whether they have reduced headcount.  Per the SBA, borrowers can choose to compare their average FTEs during their 8-week loan compliance period to their average FTEs during either a) February 15, 2019 to June 30, 2019, or b) January 1, 2020 to February 29, 2020.  Seasonal businesses may choose either of the following OR any consecutive 12 week period between May 1, 2019 and September 15, 2019.  The 90% threshold is a minimum requirement of the loan, but any reduction in FTEs not covered by one of the “safe harbors” discussed above would lead to a proportional reduction in forgivable loan amount.  So if you received a $100k loan and only restored 90% of your FTEs, only $90k of your loan would be forgivable.

8 WEEK WINDOW QUESTIONS


I have a questions about the eight week spending deadline. We received our funds on May 5th which means the eight week spending deadline is on June 30th, but our Payroll runs on July 3rd.  I wanted to know would that be fine since we process payroll on the 30th but it wont hit our bank until July 3rd will we be ok or do we need to run an early payroll for the 30th to meet the deadline?

For payroll expenditures only, the SBA has issued new guidance. Borrowers may choose to use the 8 week period following the date they received their funds OR they may choose to use an “Alternative Covered Payroll Period” calculation as follows:  Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the eight-week (56-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date (the “Alternative Payroll Covered Period”). For example, if the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20.

Borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the eight-week (56-day) Covered Period (or Alternative Payroll Covered Period) (“payroll costs”). Payroll costs are considered paid on the day that paychecks are distributed or the Borrower originates an ACH credit transaction. Payroll costs are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date. Otherwise, payroll costs must be paid during the Covered Period (or Alternative Payroll Covered Period). Count payroll costs that were both paid and incurred only once.

I have a question regarding the time frame for paying back the loan. Will the 8 week time clock begin once I have been approved or once I have received the funds?

The 8 week period begins when you receive the funds.

So if you follow the rules, pay the staff their same wages, use 75% or more for payroll, retain all employees or replace those who left or attempted to in good faith, documented all attempts at rehire and attempts to hire but have not spent all the money in 8 weeks, does that amount need to be paid back?

Yes, if you have not spent all of the funds at the end of the 8 week period, anything unspent must be paid back.  You will be able to pay it all back at once at that time if you choose, or you could choose to pay it back over the following 22 months (the remainder of your loan term as set out in your Note) at 1% interest.

PAYROLL QUESTIONS


If we pay for professional development for staff during this period, is that considered payroll related expense?

There is no specific guidance from the SBA on this.  We suggest you consult with your accountant to determine whether the specific expenditures you are considering would count as a non-cash benefit that would count as payroll for PPP purposes.

FMLA guidance – does FMLA pay count towards payroll for purpose of PPP?

You cannot simultaneously claim payments made to an employee for Qualified sick or family leave for which a credit is allowed under §7002 or §7004 of the FFCRA and as payroll expenditures under PPP.

Questions?


Contact PPPHelp@reinvestment.com

 

*Note: Information on this page is subject to change.