By Lee Allphin, Employer Advantage Founder and Chairman of the Board
For small businesses unable to take advantage of the Paycheck Protection Program (PPP) during its initial launch, a second round of funding called the “Paycheck Protection Program (PPP) and Health Care Enhancement Act” will provide more than $320 billion in additional emergency supplemental funding for the PPP program. The need for additional funding was deemed necessary when the CARES Act $349 billion allotment ran out before a large percentage of smaller businesses could take advantage of the program. This second round of funding will also be first-come-first-served, which is why businesses with less than 500 employees need to take advantage of this program immediately.
Years ago, I attended a Simon and Garfunkel concert. One of the songs performed was “Bridge Over Troubled Water,” which really resonates right now. I just pulled it up from my playlist and listened to the lyrics again. In specific, the one line, “Like a bridge over troubled water, I will lay me down,” made me think of the businesses-saving forgivable PPP loans and other critical government-funded COVID-19 aid as a bridge providing small businesses a way across the treacherous waters of this pandemic. In that respect, Employer Advantage has been playing an important role of guide across this unfamiliar bridge; scouting the way and supporting your journey.
Given what we know, with the economic toll of COVID-19 rivaling that of the Great Depression and predicted to possibly surpass it, we recommend businesses that wish to survive the turbulence of the coronavirus pandemic consider the safe passage provided by the PPP.
It is important to understand there are two pillars making up the structure of this bridge:
1) Qualifying and receiving the Payroll Protection Plan loan
2) Qualifying for loan forgiveness
Pillar 1: Qualifying for PPP Loans, and how they can be used
The loans are used for payroll, health insurance, state unemployment, rent, and utilities. As in the first round of funding, the second round of PPP funding is intended to prevent layoffs during this unprecedented period of business shutdown, in compliance with government guidelines to stop the spread of the COVID-19.
Basic Qualifying Requirements:
1) 500 or fewer employees
2) Need for immediate infusion of capital in order to sustain your workforce.
3) Need of additional funds to help with operating overhead such as rent and utilities.
4) Anticipate being able to return to your normal staffing levels and pay rates by June 30.
5) Not able to maintain your normal staffing levels over the next two months without comprehensive financial assistance.
Pillar 2: PPP Loan Forgiveness
According to the Treasury Department, “The federal government will forgive the loans in an amount equal to the amount of qualifying costs spent during an eight-week period after the origination of the loan. These qualifying costs include payroll costs (except of wages above $100,000 per employee), interest on secured debt obligations, and rent and utilities in place prior to February 2020.”
Note, the purpose of this forgiveness provision is to prevent layoffs. If layoffs were not prevented, the business will have a loan to repay.
Here are some important points:
- Headcount: Reducing headcount will likely reduce your forgiveness amount. Workers at some businesses that received PPP loans may have been laid off in order to file for unemployment benefits. They must be rehired if you want to maximize loan forgiveness. If workers come back quickly enough, they can be included in the final head count calculation.
- Wages paid: 75% of the loan amount must be to pay employees.
- Rent, Utilities: These must be paid within the 8-week period.
Note, businesses are eagerly waiting for more guidance on loan forgiveness. This is only a preliminary guide and subject to final calculation rules.
TIMING IS CRITICAL. The bridge over troubled water will not always be there.
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A New Path to HR Bliss – Trusted for more than 30 years, Employer Advantage frees you from the administrative and compliance burdens of having employees so you can focus on your business success. Versatile enough for companies of all sizes, our unique service combines comprehensive management of your employee administration and compliance with the latest software solutions, tailored to meet your individual needs and company culture. Our full-service management of HR, payroll, health and benefits, workplace safety, and more, enhances your profitability while reducing the costs and risks associated with employment law compliance. We provide your employees with top-notch assistance and benefits that help you increase productivity, save time and money, and attract and retain a talented workforce. And for small and mid-sized businesses, we bring you economy of scale with access to Fortune-500-level benefits, specialty assistance, and savings that would not be possible to attain on your own. Headquartered in the Midwest and serving more than 400 companies and 10,000 worksite employees throughout the country, Employer Advantage is an IRS-Certified Professional Employer Organization (PEO) (C-PEO). Experienced, certified, and trusted. www.EmployerAdvantage.com