The Paycheck Protection Program (PPP) is part of the larger government stimulus package, the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Paycheck Protection Program loans are meant to minimize the number of unemployed persons by helping small business owners make payroll through June 30, 2020. PPP loans are designed to help small business owners stay in business during this time of economic uncertainty. The hope is that if businesses can keep employees on the payroll now, they’ll be in a better position to recover fully. And as a result, fewer people will be jobless and in need of additional federal aid. And if they meet certain criteria, borrowers can request loan forgiveness. This presentation goes over what requirements need to be met to qualify for loan forgiveness at this point in time.

1. Paycheck Protection Program (PPP) Loan Forgiveness

2. Program Review
• Loan amount is based on your average monthly payroll costs for 2019. Eligible
to receive 2.5x that amount to help cover 8 weeks of payroll.
• Funds from the loan can be used for the following:
• Payroll – salary, wage, vacation, health benefits, parential, family medical
or sick leave
• Rent – as long as lease was in signed before February 15, 2020
• Utilities – as long as service began before February 15, 2020
• Mortgage interest – as long as mortgage was signed before February 15,
2020

3. Forgiveness – Need To Know
• Eight Weeks of Coverage
• 75/25 Rule
• Staffing Requirements
• Pay Requirements – 75%
• Rehiring Grace Period

4. Eight Weeks of Coverage
Eligible expenses are those that are incurred over eight weeks, starting from the day the
first payment was made by the lender (not the date loan documents were signed).
Depending on company’s payroll schedule, an adjustment to the timing of the payroll
dates may be needed to accommodate as many payroll cycles as possible.

5. 75/25 Rule
At least 75% of the loan must be used for payroll costs. Payments to independent
contractors cannot be included in the payroll costs.

6. Staffing Requirements
Company must maintain the number of employees on its payroll.
Calculation:
Determine the average number of full-time equivalent (FTE) employees the company had for:
• The 8-week period following the initial loan disbursement, (A)
• February 15, 2019 to June 30, 2019, (B1)
• And January 1, 2020 to February 29, 2020. (B2)
Take A and divide that by B1. Do the same with B2. Take the largest number obtained
(seasonal employers must divide by B1).
• If the number is equal or greater than 1, headcount has been maintained and this
requirement has been met
• If the number is smaller than 1, headcount has NOT been maintained and the forgivable
expenses will be reduced proportionately

7. Staffing Requirements (continued)
Exemption on re-hiring employees. Employees who were laid off or put on furlough may not wish to be
rehired. If the employee rejects re-employment offer, company may be allowed to exclude this employee
when calculating forgiveness. To qualify:
• Company must have made a written offer to rehire in good faith
• Company must have offered to rehire for the same salary/wage and number of hours as before
they were laid off
• Company must have documentation of the employee’s rejection of the offer
Employees who reject offer for re-employment may no longer be eligible for continued unemployment
benefits.

8. Pay Requirement – 75%
Company must maintain at least 75% of total salary.
This requirement will be individually assessed for every employee that did not receive
more than $100,000 in annualized pay in 2019.
If the employee’s pay over the 8 weeks is less than 75% of the pay they received during
the most recent quarter in which they were employed, the eligible amount for
forgiveness will be reduced by the difference between their current pay and 75% of the
original pay.

9. Rehiring Grace Period
The company can rehire any staff that were laid off or put on furlough and
reinstate any pay that was decreased by more than 25% to meet the
requirements for forgiveness. Company has until June 30 to do so.
If company’s eight-week forgiveness period ends before June 30, it is understood
that the company can still use the grace period if they reinstate headcount and/or
pay. Company will want to apply for forgiveness after June 30.

10. Forgiveness Amount Reductions - examples
Headcount Reduction
Company has three employees and they each made $3,000 per month, meaning PPP loan amount was
$22,500 ($9,000 x 2.5). Company laid off all three in March due to COVID-19.
Company only hires back two out of the three employees, company workforce is now 67% of the original
headcount.
Over the eight weeks of the PPP period, company spends $12,000 on its employees, and all remaining funds
on other eligible expenses. However, non-payroll expenses are limited to 25% of the loan amount ($5,625),
so only $17,625 is eligible for forgiveness, not the full $22,500.
However, when it comes to calculating the forgivable amount, because the workforce is smaller, the
forgivable amount is multiplied by 0.67, so the company would be able to only have $11,808.75 forgiven.

11. Forgiveness Amount Reductions - examples
Pay Reduction
Company has three employees and they each made $3,000 per month, meaning PPP loan amount was
$22,500 ($9,000 x 2.5). Company laid off all three in March due to COVID-19.
Company hires all three back but pays them only $2,000 per month.
Over the eight weeks of the PPP period, company spends $12,000 on its employees, and all remaining funds
on other eligible expenses. However, non-payroll expenses are limited to 25% of the loan amount ($5,625),
so only $17,625 is eligible for forgiveness, not the full $22,500.
When it comes to calculating the forgivable amount, the company will need to look at each employee’s
individual compensation. The 75% minimum salary is $2,250, so each is being paid $250 less than that. $250
would be deducted from the forgivable amount. Repeating that for each employee would result in a total of
$16,825 forgiven.

12. Applying for Loan Forgiveness
Application for loan forgiveness will be processed by the lender. They will
provide the company with instructions on where to apply.
After application for forgiveness has been submitted, the lender is required by
law to provide a response within 60 days.

13. Recordkeeping
These are the required documents to be collected to provide with the PPP forgiveness application. Specific
lenders may require additional information.
• Documents verifying the number of FTE employees on payroll and their pay rates, for the periods
used to verify the company met the staffing and pay requirements:
• Payroll reports from payroll provider
• Payroll tax filing (Form 941)
• Income, payroll and unemployment insurance filings from state
• Documents verifying any retirement and health insurance contributions
• Documents verifying eligible rent, utility and interest payments (cancelled checks, payment receipts
account statements)
Good recordkeeping and bookkeeping is critical for getting the loan forgiven. Company will need to closely
track eligible expenses and their accompanying documentation over the eight weeks. The lender will most
likely require these documents in digital format, so take the time to scan any paper documents.