Recipients of PPP loans have 8 weeks from the date of funding to spend the loan on specific allowable expenses if they want to benefit from the program’s forgiveness provisions.   Taking care of some details on the front end will surely help with forgiveness on the back end.

Make a budget.  Maximize the use of the loan funds on forgivable expenses.  Be sure to include health insurance and retirement benefits as part of your payroll costs.  Remember that your non-payroll expenses cannot exceed 25% of your allowable costs.

Determine your base full-time equivalent head count.  This will be the lower of your average monthly full-time equivalent employees (FTE’s) for either the period of February 15 to June 30, 2019 or the period of January 1 to February 29, 2020.  You can choose whichever period is most beneficial for you.  An employee is considered a full-time equivalent if they work at least 30 hours a week.  Multiple part-time employees are added together to form full-time equivalent employees.  GranthamPoole can assist you with this calculation.

Decide if you need to re-hire employees or restore salaries to earlier levels. If you have furloughed or laid off employees, you can bring them back by June 30 and avoid a reduction in loan forgiveness caused by a reduced headcount.  If employee salaries have declined more than 25% since February 15, 2020, you must restore their salary levels to avoid a reduction in loan forgiveness.

Decide to forgo Forgiveness. In some cases, the cost to the business to rehire employees during the short 8-week forgiveness window does not make good business sense.  Depending on your business model, it may be more advantageous to use the funds for more long-term payroll needs and forgo the possible forgiveness since the interest rate is very low.  We have tools to help your business model the best answer for you.

Loan forgiveness under the Paycheck Protection Program is multi-faceted, and official guidance from the SBA in this area has been scarce. The strategy one company uses may not be the best strategy for another.  Although we await official guidance on forgiveness, what we do know is that the use of these funds requires thought, planning and documentation to maximize the benefit and the forgiveness.  Most importantly, we understand the nuances of this process to help you meet your business goals during this unsettled and uncertain time.  Call your GranthamPoole advisor or visit our COVID-19 planning page.  We have a team of professionals ready to help.

Stephanie B. Smith, CPA, CFF

Stephanie B. Smith is a member of GranthamPoole PLLC and a recognized leader in the fields of business valuation and litigation support. She has also written, taught, and spoken on many topics in the area over the years and has served as a technical advisor and testifying expert in numerous cases. Please contact Stephanie at or 601-499-2400. CPA License # 3657

***The above does not represent tax advice. Each situation is fact-dependent, and you should seek the advice of a competent advisor. GranthamPoole PLLC is a provider of tax, accounting, advisory and strategic services, partnering with clients across a broad spectrum of industries and sizes.

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