Paycheck Protection Program (PPP) Forgiveness advisory services
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To our valued clients,

Many of you participated in the PPP loan program and we hope approved funds have or will begin to hit your bank account. Therefore, we want to present the following summary of issues and planning opportunities for you to consider. Please note this information is based on the interpretation of the current regulations and are subject to change based on future guidance expected from the Small Business Administration (SBA).  

  1. The loan will be forgiven if spent on “eligible expenses” during the Eight-Week Period (EWP) that begins on the day you get your loan proceeds.

  2. “Eligible Expenses” include payroll cost, covered rent, covered utilities, & covered mortgage interest. (See key terms defined further here).

  3. Complex Forgiveness Reduction Calculations must be made to determine the forgivable amount.

    A. Headcount reduction: If you have fewer employees, full-time equivalents (FTEs) in the EWP than in your baseline period then your loan forgiveness is proportionately reduced. The baseline period can be either 2/15/19 to 6/30/19 or 1/1/20 to 2/29/20.

    B. Salary/Wage reduction: 1/8 of the total amount paid to each employee during the EWP must exceed 75% of their individual average weekly pay rate calculated for Q1 of 2020.

    C. 75% payroll costs rule: At least 75% of loan proceed amount must be spent on payroll costs.

    D. Safe harbor rules: If by June 30, 2020, you bring your FTE levels back up to where they were on February 15, 2020, then that eliminates whatever reduction in forgiveness was attributable to headcount reduction. A similar rule exists to eliminate salary/wage reduction.

  4. Subsequent to the EWP you will be required to present documentation to your bank supporting eligible expenditures & forgivable loan data information. We expect the time to present this will be short and potentially non-negotiable nor extendable!

  5. Consider (not required) putting your total loan proceeds in a bank account by itself. As you pay expenses eligible for forgiveness you can transfer the money from the PPP bank account to your operating or payroll account to reimburse those accounts & keep detailed records of eligible expenses paid.  

The loan forgiveness features of the PPP are complex.  Maximization will require proper set-up, execution, adjustment planning, documentation, and presentation. Please let us know as soon as possible if you would like to engage us to perform any of these forgiveness advisory services.

Please call your trusted Machen McChesney advisor if you have any questions.
Best Regards,

Martin D. Williams, CPA,
Managing Partner
Machen McChesney, LLP

Montgomery: 1761 Taliaferro Trail | Montgomery AL 36117

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