As you reach the end of your covered period for your Paycheck Protection Program loan – if going with the 8-week option – here are some tips for getting ready for the forgiveness application process.
You may have seen our recent article about the new EZ forgiveness application. Eligibility for that application is a matter of interpretation.
Whether you can or can’t use that application will depend on your ability to and comfort with certifying to the SBA that you have not been able to operate at the same level of business activity during your covered period as you did prior to Feb. 15, 2020. Your records, both financial and otherwise, would need to show that your business activity was impacted due to government mandates related to COVID.
To determine eligibility to file the simplified form, you can start by gathering copies of state and local government mandates, as well as, by reviewing sales history, transaction counts, and sales data for dine-in business – comparing before and after Feb. 15, 2020.
The banks have been pretty clear that they will not be determining which application you should use – this will be a certification of eligibility made by you, the borrower, and later left up to the SBA to ultimately decide if you were eligible for the EZ form. You may want to seek advice from your legal counsel, as well.
Additionally, if you have come to the end of your eight weeks, here are some things you can do to keep things moving along:
- Stay in contact with your lender to know when they expect their system to be ready to accept applications and how that process will look. Some are taking a staggered approach and sending “invitations” based on when PPP loans were funded. Their goal is to help ensure a smoother forgiveness applications process. In the recent guidance from the Treasury Department, lenders have been given 60 days from the date you apply to do a good-faith review of the forgiveness applications; for this reason, you should expect that the pace of forgiveness will not be as frenzied or fast as it was with the initial PPP loan applications. Guidance is still expected from the SBA, including details and a process for how the banks will deliver their forgiveness determinations to the SBA. For this reason, many banks have said they will not begin accepting applications until these important details are complete.
- For those with payroll providers who have been on top of this PPP process, get comfortable with and begin gathering the reports available to assist you with this forgiveness process.
- If your payroll company has not been communicating with you regularly over the last three months about the PPP reports that they will be offering, we suggest that you reach out to them immediately to ask for assistance with FTE reports for the various reporting periods (base period options 1, 2, safe harbor, and covered/alternative covered period), as well as, ask them if they have or will be providing a report to assist with the Schedule A worksheet preparation which is needed for the completion of the forgiveness application and required by the SBA to be maintained in your PPP loan files for six years after forgiveness.
- Make sure that you have updated your PPP expense tracker and have spent the money in accordance with the latest guidance (minimum of 60% on payroll costs and no more than 40% on non-payroll costs). A detailed spreadsheet containing details of your payroll and non-payroll costs during your covered/alternative covered period will be essential to the preparation of the forgiveness application.
- Additionally and to support that detailed spreadsheet, make sure that you have gathered necessary supporting documentation for your eligible payroll and non-payroll costs (rent and utilities), including copies of invoices/payroll reports and copies of bank statements/cancelled checks showing the payment of these eligible payroll and non-payroll costs.
- Last but not least, if you haven’t memorialized the impact of COVID on your business over the last four months as discussed in one of our earlier communications, now is the time. Document late March and April daily sales trends, as well as, staffing and supply chain concerns from March until today; document PPE costs and concerns, lobby re-opening considerations and modifications (beverage bars, kiosks, limited capacity, mask requirements) – document anything that is relevant and tells the story of your restaurant organization’s battle through COVID. This document should be at the start of every good and complete PPP file.
Tackling these tasks today should help ensure that you are in good shape to start the forgiveness process when the banks are ready and the payroll reports are available. As always, if you have any questions, don’t hesitate to ask.