One of the more attractive features of Paycheck Protection Program (PPP) loans is the possibility that the borrower may never have to pay it back. But loan forgiveness is far from automatic.
During an hourlong webinar this morning, Al Titone, the Small Business Administration (SBA) district director for New Jersey, was joined by members of the accounting firm Prager Metis to provide some additional details on the SBA loan programs created to help businesses deal with the coronavirus pandemic—the PPP and Economic Injury Disaster Loans (EIDL).
By now, the basics of the loan programs are known. If you need more details on how to apply, please visit the grants and loans section of NJBIA’s coronavirus resources page.
The PPP is designed to help employers impacted by the pandemic continue to pay their employees whether or not their business is open or their employees are working. The loan forgiveness provision is the big carrot the federal government is offering to accomplish that goal, considering the loans can be for as much as $10 million.
According to Titone, however, there are four things that a business has to do to qualify for loan forgiveness:
- Spend at least 75% of the loan amount on payroll, which can include the cost of health benefits but not be more than $100,000 for any individual employee. The loan amounts are calculated based on a business’ past payroll to begin with, so it is meant to be used to pay employees.
- Maintain the same number of employees or restore employment to the same level it was prior to Feb. 15. If you’ve already laid off or furloughed employees, you have until June 30 to restore them. A business does not have to rehire the same employee, but it has to have the same number of employees it had prior to Feb. 15.
- Pay salaries and or wages that are at least 75% of what employees were making before the pandemic hit. Again, businesses that have cut hours or pay have until June 30 to restore the pay levels.
- Use the loan to pay approved expenses outside of payroll, including utilities, rent and/or interest on the mortgage for the place of business.
Titone stressed however that loan forgiveness is not an all-or-nothing requirement. If, for instance, a business is only able to bring back eight of its 10 employees by the June 30 deadline, it can still get a portion of the loan forgiven.
“It doesn’t mean you have to pay the whole loan back,” Titone said, “just the difference between what you did use for those (eligible) costs and what’s left over.”
Robbin Caruso of Prager Metis said businesses should consider what they need the loan for before deciding whether to use a disaster loan or the PPP. While businesses can apply and be approved for loans under both programs at the same time, those loans cannot be used to cover the same costs.
“If you’re really needing this money for working capital and supplies and things the PPP won’t enable you to use, then you might need to rethink which loan is better for you, and the EIDL might be the better choice,” Caruso said.
Disaster loans can be used for payroll as well, and while they’re not forgivable, they do have a 30-year term, while PPP loans have to be paid back in two years, Titone added. There’s also no penalty for paying them off early.
Caruso said businesses should also make sure they keep good records now so they can prove to the bank later on that they spent the money on forgivable expenses. Even though it’s a government loan, the banks are the ones that will be evaluating the applications for loan forgiveness.
“It’s the bank that has to review all of that and say, ‘yes this is authorized for forgiveness,’” Caruso said. “So they have a lot of responsibility. We can make their lives easier by being prepared with everything we need.”
One thing businesses should not do is dawdle when it comes to restoring their payroll just because the deadline for restoration is June 30. Both Titone and Caruso said a business that waits too long after the loan is received could find itself in hot water.
NOTE: All past questions directed to NJBIA as comments on this page were answered privately through NJBIA Member Services. Future message will also be monitored and responded to within the comments section.
I applied for a PPP for my non profit dance company through our bank, of 30 years, TDBank. When might I expect to hear from them about acceptance or rejection of my loan? I was told by my branch manager that they received 25,000 applications. Do you know their selection criteria.
what’s wrong with santnder bank It won’t allow its business customers to apply for a PPP loan
We have applied for the PPP loan through Chase and are waiting approval. My question is whether our business, in the months to come with be prosperous enough to rehire the same number of employees. Our set costs will still be the same but we don’t know what to expect with regard to getting back to the same properous business pre corona virus. Would we be better applying for different funding?
I had been waiting on Key bank since the first round.I applied to a small town bank got approved in 2 days Ill get my lian this week.
weekend,do
I applied through my bank Chase April 3 over a month ago when it first came out and I still have not heard a word. I re-applied through Pay Pal
https://www.loanbuilder.com/ppp-loan-support
last Sunday when the 2nd set of PPP funds were disbursed and receive the funds in my account on Thursday. I received and email from CHASE today saying my application was STILL in queue!
We’re a two person LLC filing as a partnership with 1065/Schedule K1’s. We only have paret time employees with pay 1099. We’ve heard everything from “you’re not eligible” to “file as self employed”. But then as self employed they only want 1099’s and no mention of K1-s. Someone told us to file regular PPP anyway and then we were told without a 940 you’re instantly denied. The bank told us they wouldn’t even forward our app to the SBA.
Are we in a donut hole that no one remembered how this works?
Eidl capped at 15k now due to large demand; get the ppp because nothing else is coming.
The Chase bank on line application will not proceed with my loan application but I have no way of contacting them to find out what the trouble is. They say they will email or call but that really does not happen since it has been a week now and I am concerned the funds will run out. Do you have any suggestions for me on how to proceed?
Thanks,
Joe Trobert
I&E Company
Ogdensburg, NJ 07439
973-670-1544 cell
Hi,
Try to apply with other lender. Use PayPal or kabbage websites, they’re taking applications.
If your business is still operating and you cannot be sure if customers are able to pay for the service, since ,they may be laid off, can the ppp loan be forgiven even if the company does not lose money?
If you approved for the PPP loan and something happens that you can not open you business back up are you Required to pay the loan back?
Debra,
As it is written now – if you don’t spend 75% of the grant on payroll and related employee costs it turns into a loan. So you have to decide if this is the right program for you.
You can check out the NJEDA wizard from our website in the grants and loans tab which walks you through all options to see what is best for you. http://www.njbia.org/coronavirus
Hope this is helpful.
Yes.
If you are hiring employees back prior to June 30, 2020, how long must they be retained?
If you’re rehiring employees with the intent of furloughing or firing them within a predefined time period, in order to qualify for loan forgiveness, might you not be entering into the realm of fraud?
I think my question like his, is we can hire them back and hope things will get better but if sometime in July we still have no work, we may have to lay people off.
I am a retail business and appied for and received a PPP loan. Problem I am running into is that with UI and the new $600/week kick in, nobody wants to come back to work. They are earning more on unemployement. Has anyone else run into this problem and if so and suggestions
Once you offer your laid off employee a job, they no longer qualify for unemployment. In Ma, you can login to the website and report you offered them work and get their checks stopped.
So, you can get them back .. I haven’t figured out how to deal with the disgruntled employee that has just been created though.
I’m considering the same issues and have three thoughts…
1) I understand why employees would choose to stay home if they make more money doing so. While I’m not o.k. with them taking advantage of the system, I’m not going to go out of my way to report them unless the UI department asks (in which case I would be more than happy to tell them). If they don’t want to work and prefer to take advantage of UI…I’m not sure that I really want them back.
2) The available labor pool should be massive right now. Those who have been laid-off that really want to work and college students whose senior years were cut short will be graduating and looking for work (most couldn’t find good jobs before the pandemic). If I have employees who won’t come back to work, I am considering hiring new “temporary” employees (same as seasonal). I plan on using the remaining time we are closed to do more in-depth training than I usually have time for with new hires prior to reopening so we hit the ground running.
3) I think the additional $600 from the fed is limited to 4 months. Employees on UI will already be 2 months into UI when we re-open. Two month after we re-open, when the extra $600 is running out, and past employees begin looking to work, I will have the best options possible. I will have worked with my new hires for two months and figured out who I want to keep and who to let go. If I like my new hires better, I stay with them. If I prefer my original employees, I let my temps go.
It usually works out better in my head than in the real world, but those are my thoughts at this point.
I have offered jobs back to all my employees. And like you said, they won’t come back or only want 15hrs so that they can continue collecting. Where do I report this?
I offered a job to one of my employees and she said she needs more time due to her needing to watch her child because school is closed. I said I would have to report her if she is refusing to come back to work.. she told me she is not quitting she just needs time to figure this out.
What do I do?
She,as well as any employee who was pushed to claim unemployment by their employer and the employer who now wants to take advantage of PPP and call them back even though employer may not be considered essential, would have rights under NJ Employment to answer “No” to the Question “did you refuse work” On the NJ Dept. of Labor Website it states – when certifying weekly
If you refused an offer of work due to “concerns” related to the travel/stay at home restrictions, OR because you were ill or you need to care for a coronovirus infected family member or care for dependent whose place of care or school is closed because of coronovirus you should answer NO .
I think the first line of this question pretty much covers everyone “concerns related to travel/stay at home restrictions.
The PPP IMO was rushed out to quickly to consider this variable I have heard Congress is asking the Treasury Dept. to rethink the re-hire clause of 8 weeks/End June and expand to the end of the year – as well as 50% use for payroll v.s 75%. That sounds far more reasonable for all concerned / both employer and employee.
At what point does the “employee get to make their own choice to protect their own health and that of their family and not be penalized for that decision? Lot’s to consider here and it is not just about the employer!
Kathi Gallichio’s comment is very much to the point regarding weaknesses in the PPP, however well-intentioned it is. Our business (catering) will not be anywhere near prior levels for months, due to both shelter-in-place mandates and client anxiety, so there is no way I can bring my employment back to pre-COVID levels. And then too many employees won’t return, for either good or bad reasons, which only increases the impossibility of us fulfilling that PPP requirement. Besides all that, much of my employment level (and payroll disbursement) is based on casual labor w/no fixed schedule; we’d have to offer PPP funds to everyone, calculate what someone who worked all of 17 hrs is entitled to get *before* asking them, and then have many say No anyway.
Given that employers are essentially in competition with the government due to UI, the $600/week payment, and the one time $1200 payments to many, the PPP should be reconfigured so that X % of it is used for payroll, with lower thresholds to meet forgiveness requirements.
This link shows the text of the CARES Act:
https://files.taxfoundation.org/20200325223111/FINAL-FINAL-CARES-ACT.pdf
On page 86 it explicitly states that a person qualifies for expanded unemployment if they have a child to watch due to schools being shut down. You have no legal basis to harass or intimidate this employee of yours into helping you get free money through PPP. She does NOT have to work and you’ll be wasting your time if you “report” her.
I have the same issue. However, in NJ we have not returned to work, so I don’t have work for my employees yet and can not ask them to give up unemployment and return to work with nothing to do. Once we reopen, I will require them to return at that point. I received my PPP Loan and I’m caught in a difficult situation if we do not open soon.
Hi Chris, did you get any feedback on your concern? I am pretty much in the same predicament as you. Any insight right now is helpful.
This is the practical aspect of all this. If work is available and someone doesn’t show or refuses to come back or accept, they should be ineligible for UI. This is an unintended consequence that many are dealing with. For loan forgiveness you would need to hire new or consider increased hourly rates.
remember that a person on unemployment loses it if they refuse an offer of re-hire
In any other time but in a Pandemic I would agree with you, but now more then ever we need to keep in mind “person choice” on safety and health.
Explain to them that the $600 a week extra that they are getting now is not going to be for the rest of however long they qualify for unemployment. That would be ludicrous to think that.I’m not really sure for how many weeks longer they are going to get the $600 but it definitely will not be until their unemployment runs out. It is better to go back to work.
entitled to this until end of July which to me seems like a more reasonable deadline for PPP to roll out not June 30. By then better projection on virus mitigation would be know as well .We keep forgetting the virus is still out there – yesterday May 3rd was the deadliest day to date on numbers who passed. As an employer I would be hard pressed to mandate a return to work decision for any of my employees – it is a personal one.
I have encountered this
If you are offering them work and they decline
They are supposed to report that on their weekly unemployment filing document. It could result in disqualifying them for unemployment if they are not available when work is. This is the speculation I have had to bargain with my employees to get them back 🙁
I am having the same experience as John Kennedy. The employees are making more money by not working than by returning to work. I will NOT be able to rehire them until their free money runs out (July 31st). My only option now would be hire new people who are not on benefits and are therefore eager to work. The problem with this is that my previous employees were well trained and I am not in the position to start re-training people in the middle of a pandemic. I think I may have a lapse in the loan forgiveness due to this problem.
does this include part time employees, or just full time employees have to be working as of 6/30
This includes part time as well.
I have 1 W2 employee and 2 contract employees, can I convert the 2 contract employees to W2 wages and pay them out of PPP money, depleting it faster, forgoing drawing out the owners draw portion and still qualify for forgiveness?
Are you going to reply to any of these above questions? I get the point is to hire staff EVEN if you have no work so that they get of of unemployment. What happens after this PPP money (that may or may not be forgiven but the crazy rules which are like putting a wuare peg in a round hole, especially for a large gatheirng venue who has the majority of their staff works way part time and only when you have an event) — runs out and you still are not allowed to go back to work, in our case have weddings and corporate events with many people gathierng together . . . Then we would have to furlough them all again. . . ?
This is a great snapshot of qualifying for loan forgiveness. I still have one question.
L:ike so many, my business went to a standstill the early part of March. I continued to pay my employees up until last week when I ran out of money and was forced to furlough them. I paid my employees with funds that should have paid vendors. I thought I could use some of the PPP funds to reimburse some of the previous payroll. Now I understand the forgiveness ties to the 8 weeks following the funding. I don’t think this was clear early on. If it was, I didn’t get it.
My employees are currently furloughed and I’m concerned about them immediately coming back, once I receive the PPP funds. Most are making more money on unemployment. I see in your write up that I have until June 30 to get my employee FTE count back to previous counts either by my furloughed employees coming back or having to hire new employees (which takes time). Everything I seem to be reading states that I have to use the funds the 8 weeks AFTER I’m funded. This is nearly IMPOSSIBLE to expect to have all the employees show up on one day after they have been furloughed.
The question is, will I still be eligible for forgiveness as I try to bring back staff from the time of funding through June 30. I feel their is conflicting messaging in the PPP documentation between the 8 weeks and the June 30 deadline.
I’m currently in the process of filling out some additional paperwork for the bank to finalize my PPP. I’d like to have a clear understanding of the question before I finalize my PPP request. Your feedback and insight is appreciated. Thank you!
Hi Denny Curious if you got a reply, we are in the predicament, we want to bring our workforce back to work, but cannot until the states lifts the lock down and with only 8 weeks to use the money after receipt this seems impossible. There must be some type of catch to this?
There is conflicting information about loan forgiveness. The June 30 deadline was when the program was to end. We have also been told the 8 week “clock” starts when you receive the funds. There are also some legal interpretations: To encourage employers to rehire workers laid off due to the COVID-19 crisis, borrowers who rehire laid off workers by June 30, 2020, will not be penalized for having a reduced payroll at the start of the period.
So at this point, until more guidance is provided, best to speak to your lender about your specific situation for PPP, and look into other grants/loans.
Hi Denny
Great question. We are in the same bucket. Did you get any guidance?
I own a daycare center and my kids have drastically dropped in numbers. I gave each employee 4 hours of work but said I would pay them for 8. But a lot of them are calling in now saying they can’t come to work. But I have to pay them anyway. I’m not going to have any caregivers to watch children at this rate. What am I going to do?
We had to lay-off an employee in March before applying for PPP loan. He has since got hired elsewhere and has a contract for 3 months We wish to hire him back but he won’t be available before June 30. We still have payroll that will cover full loan. Will we receive full forgiveness if loan is completely used?
Hello
1-If you do not meet the 75% requirement for payroll costs will the loan not be forgiven in its entirety?
2-Can you return the portion you don’t need and then do the 75/25 split on the portion you keep? If so , when must this be done by?
I have a daycare with 45 full n p/t employees which was abruptly shut down on 3/25/ cuz of the Corona, n they immediately went on UI. We got approved for ppp loan 5/2 but don’t know when money will come, n we have already heard some employees don’t want to come back bcuz of $600 week. We don’t think Ohio gov will allow us to open before some time in June n at stages. It is now May 3, what do we do? I have signed nothing yet. Nancy
If a company is an essential company, they have not furloughed or laid anybody off, but still received $215,300 from the PPP. And weren’t really affected by the so-called pandemic, still eligible for forgiveness?
We received the PPP money and we are able to hire our team back. What happens if I have to lay off some of the team at the end of 8 weeks due to lack of business? Does this mean that we would not be eligible for forgiveness?
I am employed at a small automotive repair facility. We have 3 employees in total including the owner. We have been on reduced hours. I have filed for UI benefits and have been receiving them. The owner has applied for and received PPP funds. The amount he received far exceeds our payroll and applicable bills. Can he raise our pay rate to hazard pay for the 8 week period in order to use the funds entirely so he is eligible for forgiveness? I am the office manager and desperately need clarification to avoid a pitfall
I got a PPP loan but I am in Palm Beach County Florida. I am still mandated to stay close although the rest of Florida is in phase one.
Is there discussion about changing the regulation to allow the 8 week clock to start ticking for businesses like me once we’re allowed to be open?
I got the PPP loan and rehired all of my employees. I have an employee
who was on the brink of being fired prior to the loan and now I want to
let him go. Is there a way to do that and be in compliance?
Our business is closed as per the Governor and Mayor of our city. We applied for the PPP Loan and were approved. Our only concern now is, since we are not operating how can we write a rehire letter to our employees asking them to come back if the business is closed and they are collecting unemployment. We don’t know if the governor and mayor will let us open by June 30th.
March 20th I laid off two employees (who have not collected/applied for unemployment compensation) and reduced the hours of one other. I received a PPP loan May 1. Is it appropriate to use PPP to pay back wages (Mar 20th through April 30th) lost to those employees before the money was issued May 1?
Our Governor of Michigan has just allowed our small manufacturing shop to reopen this Monday May 11. We were given a PPP loan that started at the end of last week. Our employees called back will not receive a check from us for this week until next Thursday May 21 for their first week back. So that takes away 2 weeks of our loan if the loan is only good for 8 weeks from the time of receipt. Am I correct in this thought process? If so, this just isn’t right. Please advise.