New question for update:

“How is this affected by employees that have already claimed unemployment? And, while I realize the compensation varies by office, given the loan structure, approximately how long will this type of loan sustain payroll expenses?”

The government wants you to hire back those employees that were getting unemployment.  The driving force behind the PPP is that employers keep paying their employees (in order to support the unemployment rates). So a business that has enough money to continue paying for their employees can use the PPP money on other qualified expenses, such as rent and utilities.  But if the business has to choose between spending the PPP money on employees or other qualified expenses, any amount not paid to employees is reduced from the loan forgiveness, so the business should pay its employees. If the business decides to pay for other expenses, the amount forgiven will be reduced by the amount not paid to employees (not as a dollar-for-dollar, but this is the concept).

The length of time that this will help sustain is dependant on the number of employees you have compared to last year, and whether you have an income source that this is supplementing. Theoretically, if you business was exactly the same as last year (which most businesses are not), then it would be 2.5 months of payroll.

Again, feel free to contact us by commenting below or email: Isaac@ccsklaw.com


New Update about Banks and Timing

Just want to be clear that the 1-3 day payout period mentioned in the video is after someone has been approved. However, I’ve spoken with several banks and they have not yet been given the directions on how to administer the funds yet. Further, they are overwhelmed with calls right now. So do not hold it against your bank if they are still putting together the program this week!

Update on PPP Loan: Big Changes as of April 3

Yesterday, the SBA released an Interim Final Rule that changed some rules on the PPP Loan application.  The largest two are:

  1. The SBA has now determined that a 1% interest rate is appropriate (not the 0.5% as previously stated by the SBA).
  2. Further, Independent Contractors do NOT count as employees for purposes of PPP loan calculations. Independent Contractors have to apply on their own.

Read More


Here are some questions that I’ve been getting regarding the Cares Act for small businesses.

“Isaac, Is there a provision for new hires that have not previously been on payroll or have been functioning?”

Great Question. The way it works is in two parts:

1. How much you qualify for.

2. What you can spend it on to be forgivable.

  1. How much you qualify for: You will take the last 12 months of payroll (and related payroll expenses such as health insurance, payroll taxes, retirement matches) and add them up. Take that total and divide by 12 to get a 1 month average. Then multiply that by 2.5.  That is the amount you qualify for.

For purposes of calculating “Average Monthly Payroll”, the Paycheck Protection Program Application Form states that “most Applicants will use the average monthly payroll for 2019, excluding costs over $100,000 on an annualized basis for each employee.”

  1. What you can spend it on to be forgivable. You can spend that on any business expenses you wish, but there are only certain expenses that qualify for forgiveness. This includes payroll, rent, utilities, interest, health insurance, payroll taxes. If you spend the “loan” on these expenses, then that amount will be forgiven.

To answer your question, if your new hire is replacing a prior employee so payroll was the same, then that new employee will be covered. If you added a brand new position on your staff in Feb 2020, then the last 12 months will not have them as a very significant part of the payroll.  However, you can spend the money to pay that new hire, and that amount will qualify to be forgiven.

“Good day, is an application already established for the PPP Loan?”

Not yet.  I talked with multiple banks on Friday (3/27/20) and they were just finding out about the process.  Any current applications available are for the SBA Economic Injury Disaster Loan.  Banks should start taking action on the Payroll Protection Plan on Friday April 3rd for small businesses and sole proprietors, and April 10th for qualified self-employed and Independent contractors.  This will go through any bank that is insured through the FDIC.

“Do self-employed or sole proprietors qualify for the payroll protection plan?”

Yes. Owners qualify for the loan so long as not in excess of $100,000. Payroll costs include employee salary, wages, and commissions; payment of cash tips; payment of vacation; parental, family, medical, or sick-leave; an allowance for dismissal or separation; payment required for group health benefits (including insurance premiums); payment of retirement benefits; or payment of state or local tax assessed on employee compensation; and sole proprietor income or independent contractor compensation not in excess of $100,000.

What are the Terms of the Loan?

The Loan (if not forgiven) will have an interest rate of 0.50% fixed rate. over a 2 year period. All payments are deferred for 6 months; however, interest will continue to accrue over this period. (See Facts Sheet). 

You can ask your questions by commenting below or emailing at Isaac@ccsklaw.com or calling 219-230-3600

Full Text of the Law

PPP Loan Application

About the author

Author profile

Isaac Isaiah Carr, JD MBA is founder, CEO, and business attorney of CCSK Law, a kingdom-driven law firm. Launched 5 years ago, CCSK Law grew from a single member firm to a 10 person team. His areas of focus include business formation and strategy, contract writing, sales, and corporate finance. Often referred to as an entrepreneur with a law degree, Isaac is able to offer business strategy utilizing creative solutions guided by legal and accounting principles that are then well executed in law. Experience in a variety of industries including real estate, hospitality, automotive, e-commerce, professional services, and healthcare. Successfully negotiated and closed multi-million-dollar transactions, ranging from $1.8M to $10M, with private investors, corporate leaders, and municipalities. Ultimately, he builds sustainable structures for systematic growth. Graduated from Valparaiso University Law School summa cum laude with his Juris Doctorate as well as the AACSB-accredited Valparaiso University School of Business with his Master’s in Business Administration. Passionate about education in all forms, Isaac is involved in the nonprofit organizations of SCORE, Neighbors’ Educational Opportunities (NEO) and New Vistas High School, ValpoNext, and Music Neighbors.

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106 Responses

  1. I was reading that you have to have a certain amount of employees paid as a previous time frame or the amount forgiven is reduced. Is this true?

    Also, if they are on unemployment, how long do you have to bring them back? Is there a time frame for spending the money?

    • Yes, the amount you qualify for will be based on previous payroll, and the government wants to incentivize you to continuing paying the same amount of people. Basically, the amount forgiven is reduced if your head count during the 8-week covered period is less than the head count during certain previous time periods. Otherwise it will have an effect on how much is forgiven, and the amount not forgiven, remains a loan at 4% interest rate.

      The formula for how much the forgiveness may be reduced compares the average number of full-time employees from: February 15, 2020 – June 30, 2020, versus the average number of full-time employees from either February 15, 2019- June 30, 2019, or January 1, 2020 – February 29, 2020. So you will want to bring the employee back as soon as possible to count during the February 15, 2020 – June 30, 2020 time frame.

      • Update: The Treasury Department has stated that the Loan (if not forgiven) will have an interest rate of 0.50% fixed rate. over a 2 year period. All payments are deferred for 6 months; however, interest will continue to accrue over this period.

    • Hi – I have a business where I pay independent contractors (1099) and I also pay myself (traditional payroll) – when calculating the loan amount – am I able to include what I paid my contractors or only what I paid myself?

  2. Hello Isaac, thank you for your help. I have a question, I have furloughed my THREE (3) employees on Friday 3/20 and they have applied for Unemployment benefits immediately. They haven’t gotten their Unemployment benefits yet and not sure how soon they will. Can you please explain to me what is the June 30, 2020 deadline in the loan forgiveness terms mean? May I allow my employees stay on Unemployment until June 28, 2020 and then officially start all 3 employees on my payroll on June 29, 2020 again. Will my PPP loan money spent on payroll and other qualified business expenses under the PPP guidelines from June 29, 2020 onward qualify to be forgiven? To clarify, when do I need to rehire my team back so I can insure that my PPP loan money is forgiven?

    • Thanks for the question! You may allow them to stay on unemployment, but that amount will not be forgiven (it will stay as a loan at 4%), so to get the loan forgiveness, you want to bring them back as soon as possible (except re-hires may be brought back until 30 days after the passing of the Bill – April 26th). I’m going to reiterate some of my previous comment above: the amount you qualify for will be based on previous payroll, and the government wants to incentivize you to continuing paying the same amount of people. Basically, the amount forgiven is reduced if your head count during the 8-week covered period is less than the head count during certain previous time periods. Otherwise it will have an effect on how much is forgiven, and the amount not forgiven, remains a loan at 4% interest rate.

      The formula for how much the forgiveness may be reduced compares the average number of full-time employees from: February 15, 2020 – June 30, 2020, versus the average number of full-time employees from either February 15, 2019- June 30, 2019, or January 1, 2020 – February 29, 2020. Again, this is why you will want to bring the employee back as soon as possible to count during the February 15, 2020 – June 30, 2020 time frame.

      The bill built in an “EXEMPTION FOR RE-HIRES” section that does provide for you re-hiring employees that you laid off as an exception from the amount of loan forgiveness reduction. So you could theoretically re-hire them on April 25th without it counting against your loan forgiveness amount.

      • Update: The Treasury Department has stated that the Loan (if not forgiven) will have an interest rate of 0.50% fixed rate. over a 2 year period. All payments are deferred for 6 months; however, interest will continue to accrue over this period.

  3. What is the qualified expense time frame for the forgiveness formula?? One website said it was retro active from 2/15 through 6/15. Is this correct. Meaning the money i spend on qualified things for loan forgiveness is from what date to what date?

    • The text of the law states “An eligible recipient shall be eligible for forgiveness of indebtedness on a covered loan [of] costs incurred and payments made during the covered period” and “the term ‘covered period’ means the 8-week period beginning on the date of the origination of a covered loan.”

      The dates that you are hearing about are [almost] the covered period for the when other businesses may apply for the PPP Loan and that period of time is used for particular calculations under the program. Specifically the text of the law states “the term ‘covered period’ means the period beginning on February 15, 2020 and ending on June 30, 2020”

  4. What about partnership business that have no employees? And s-corp owners for the non self employment earnings portion that shows up on their K-1s?

    • Great question, and the text is vague on payments taken as distributions to the partners. Here is the text from the law:

      “INCLUSION OF SOLE PROPRIETORS, INDEPENDENT CONTRACTORS, AND ELIGIBLE SELF-EMPLOYED INDIVIDUALS.—
      (I) IN GENERAL.—During the covered period, individuals who operate under a sole proprietorship or as an independent contractor and eligible self-employed individuals shall be eligible to receive a covered loan.
      (II) DOCUMENTATION.—An eligible self-employed individual, independent contractor, or sole proprietorship seeking a covered loan shall submit such documentation as is necessary to establish such individual as eligible, including payroll tax filings reported to the Internal Revenue Service, Forms 1099–MISC, and income and expenses from the sole proprietorship, as determined by the Administrator and the Secretary.”

      The text expressly includes “income and expenses from the sole proprietorship”. An “eligible self-employed individual” would include a partner in a partnership, which seems to be “as determined by the Administrator and the Secretary.” (Administrator = bank). So while the text does not expressly address partners as “eligible self-employed individuals” who would be paid for their income and expenses, the bank should consider distributions to partners the same way they would treat distributions to sole proprietors.

    • Both come into play when we’re addressing loan forgiveness. The idea is that you are going to rehire the employees and you will have the same number of employees or paying the same amount of salary during the covered period. This drives home the government’s policy of eliminating the unemployment rate as much as possible. If you do not have the same number of employees or paying the same amount of salary during the covered period, then a certain portion will not be forgiven and will remain as a loan.

      HOWEVER, there is a “exception for rehires”, where if before June 30 you rehire back to the number of employees you had at February 15th, then it will not reduce the amount loan forgiven between February 15 and April 26, but the amount of loan forgiveness may still be reduced between April 26 and June 30th. So you would want to rehire before April 26th, or possibly face part of the loan not being forgiven. But if it doesn’t make financial sense to rehire, the loan rates at 4% are pretty good.

      • I have 18 employees that I need to lay off since my business is closed and we have no eta as to when we can reopen in NYC. If I apply for the PPP loan, and once it is granted rehire the same amount back, does it have to be the same people or just the same amount of employees at comparable total payroll? I understand the law to read that I have to have the same numbers and payroll for the eight weeks after loan originates but if I am not allowed to reopen as a non essential business, is the clock still ticking or is there any allowance for that also? Any insight would be appreciated, thank you.

        • Thanks for the comment! You do not need to rehire the same people, just the same number and you need to pay those positions about the same amount as the prior hire (not to exceed a 25% decrease from your most-recent last quarter).

          Unfortunately (based on what I can find) the clock is still running. I believe the intent is that they would rather you pay your people to keep them off of unemployment, even if you are paying them when they are not working. I am continuing to research this, but that is my interpretation at this time.

        • How does the employer calculate tips and commission when paying me through the PPA cares act? Unemployment will pay more then they are based on highest quarterly. My employer came up with an “average” from the tips and commission I made 4 weeks prior to the covid-19 epidemic. This seems extremely low and incorrect. The hourly they are paying is 2/3 averaged, based on last 4 weeks. What is the percentage they are supposed to pay, and from when?
          Thank you

          • The text of the law is vague on the actual calculation of tips. It simply states that ““payment of cash tip or equivalent;” are included in payroll costs. However, they must pay at least 75% of what you were getting paid the first quarter of the year. So it should be closer to 75% at a minimum. However, across the board, many employers who pay their employees on tips are having trouble paying more than unemployment with the $600 dollar extra.

  5. I have a LLC and I’m the only person on the company I had a 1099 from my payment method Square it said I made $76,000 Can I still qualify diving that by 12 months and multiplying it by 2.5 for my total amount of 15,000 if I only need to cover mortgage and utilities from my house does that qualify my rent at my business is $1,200 but can I use that money to pay for my business rent and mortgage at home as well

    • So you are breaking down the steps properly:
      1. How much do you qualify for?
      It wouldn’t be based just on the 1099, but rather it is payroll costs incurred during the 1-year period before the date on which the loan is made (unless you’re seasonal). But it will likely be close to the $76,000 if your business was functioning at the same rate (though March 2020 will clearly be slower). As such, you will be close to the $15,000.

      2. How can you use the money?
      You can use that money for your business rent and it would be eligible for loan forgiveness. Regarding your personal home’s rent and utilities, that would be more appropriately paid to you as payroll first and then pay your personal expenses. You will have to sign a certification that:
      ‘‘the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient” and the “funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments;” presumptively for your ongoing operations rather than personal expenses. Ultimately, pay yourself as a worker to be able to pay your personal expenses, and then pay for the business mortgage with any additional amount.

  6. Hello,
    I watched your video on youtube. It was very informative. Thank you so much. I have a question regarding the PPP loan. I opened my private orthodontic office in October 2019 so I don’t have 12 month history of payroll under me. I have it from October 2019. Will that disqualify me? I bought the practice from a retiring orthodontist and my payroll amount is essentially the same as his. He has agreed to give me his payroll information for 2019, if needed. Do you think the bank would want that or my payroll from October till now would be sufficient?
    Thank you for your help,
    Best
    Hamid Saranjam DDS

    • Thank you for your comment!
      1) If the bank will accept the previous owners payroll, at this point you will submit the 12 months prior to the date of application. It is worth asking the bank for this option first and you may need to provide evidence to the bank of the acquisition of the business.

      2) If the bank does not accept the previous owners payroll (the text states that if you were not in business between February 15, 2019 and June 30, 2019), then you will use payroll between January 1, 2020 and February 29, 2020.

  7. Hi there.
    DO payroll costs include all of FICA, FUTA, SUTA paid during the time frame when they calculate how much you qualify?

    And If you have a company established in June 2019, but you started your business and paying employees in July 2019, Will they take June into consideration and assess everything based on that? Or Will you not be considered to have been in business until July 2019 and they only see your payroll for Jan and Feb in 2020?

    Thank you.

    • Thanks for the comment!
      1) The text of the law states that payroll costs include payment of state or local taxes assessed on the compensation of the employees. Thus, payroll costs do not appear to include federal taxes. Note, there are other sections of the law that address a delay in payment of federal taxes. These questions are best addressed by your CPA or tax attorney.

      2) The text states that if you were not in business between February 15, 2019 and June 30, 2019, then you will use payroll costs from between January 1, 2020 and February 29, 2020.

      • Thank you! Let me ask you one more question.

        It says in (3) REDUCTION RELATING TO SALARY AND WAGES.—

        (A) IN GENERAL.—The amount of loan forgiveness under this section shall be reduced by the amount of any reduction in total salary or wages of any employee described in subparagraph (B) during the covered period that is in excess of 25 percent of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period.

        I believe the term “covered period” is supposed to be 8-week long and A full quarter means 3 months(About 12weeks?) Evidently it does not clearly state its calculated with the product obtained by dividing the total salary of the most recent full quarter by 3 and multiply it by 2, but is it safe to assume so? If they really compare 12week salary to 8week salary, employers have to pay a lot more money than employees usually make to get full forgiveness right?
        Sorry If I missed something!
        Thank you in advance.

        • Great catch! You are correct that the express statement of the law seems to indicate that the comparison is between the 8week covered period and the 12week quarter without regard to “pay periods” or averages over those times. However, I would agree with your assessment that it is on a prorated basis, and probably by pay period given the references in other sections of the text. Ultimately, check that one with your Administrator to make sure they sign off on the interpretation as well (since they are the one who will be providing the forgiveness).

  8. Nice work on youtube.
    Question – Is there a time frame to spend the money? If I qualify for $100,000 – can I spend it immediately? (And therefore be forgiven the loan sooner).

    Example: I pay rent (5,000), all my employees (30,000), and pay myself (sole proprietor) (sole proprietor). The loan amount is used the first month. And is that forgivable ?

    Thanks

    • Thanks!
      Under the text of the law, the Loan Forgiveness means “An eligible recipient shall be eligible for forgiveness of indebtedness on a covered loan [for] costs incurred and payments made during the covered period” and the term “covered period” means the 8-week period beginning on the date of the origination of a covered loan.

      So, it seems you would need to spend the money in that 8-week period to qualify for loan forgiveness. There are a couple provisions that would be concerning on spending the money too fast, specifically that the amount forgivable may be decreased if the average number of full-time equivalent employees per month employed by the eligible recipient during the covered period is less than the employees during the same time last month.

      As such, you would end up with a loan at a 4% interest rate and up to a 10 year term (depending on the bank’s terms). HOWEVER, the loan forgiveness may come back if you re-hire your employees before June 30th for the loan forgiveness to apply for the time period between February 15 and April 26th.

      Basically, paying too fast may affect the amount of loan forgiveness.

  9. I have multiple independent contractors that work with us. Can I include them in my PPP or do they have to get their own?

    • Good question!
      So the question is if you have an independent contractor on payroll, are they included in payroll costs or does the independent contractor have to apply on their own?

      The text states: “the term ‘payroll costs’ include the sum of payments of any compensation to or income of an independent contractor that is a wage, commission, income, net earnings…” but not more than $100,000 in 1 year, as prorated for the covered period.

  10. My company is closed during this virus. If I get the money and pay my employees while they are sitting at home can I make them make up these hours at a later date ?

    • Appreciate the question!
      You are required to pay your employees for an 8 week period to get loan forgiveness, you will not be able to require them to work with no compensation at a later date. While you can still use the funds for mortgage payments, lease payments, or utility payments, doing so may cost you to lose the ability to have the loan forgiven. As such, you would end up with a loan at a 4% interest rate and up to a 10 year term. This is tough on businesses that cannot reopen for their employees to perform work for the money, but rather it encourages employers to pay their workers to not go on unemployment.

    • I found your YouTube video very informative so Thank you!
      When you talk about payroll expenses, is that net pay or can I included SS and Medicare expenses.? Also if I laid people off first of April, can I go back to March or February to do my 12 month income calculations?
      Thanks again

      • The text of the law states: “the term payroll costs [includes] payment of State or local tax assessed on the compensation of employees; [but] shall not include … taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period.”

        So while state and local taxes may be withheld, you cannot include Chapters 21 (Social Security and Medicare taxes, both employee and employer portion), 22 (railroad retirement tax), and 24 (withholding obligations from employees) of the Internal Revenue Code of 1986.

        Regarding your calculation, no, your 12 month income calculation will be 12 months starting with the date of your loan.

  11. Hi Isaac, my SBA loan for opening my business is 8% this was for the construction and investment for opening a new business 2 years ago. Can I apply for higher than just the 2.5 times the monthly payroll expense? My business is down 300% or more with COVID 19. I will have tough times paying my credit card bills and the 2.5 times payroll expense won’t get me through a month. I would also like to get more funding so I can pay off my old SBA loan at 8% interest so I can stay at 4%. Should I consider that amount or is that going to disqualify me?

    • Hi Hemal, unfortunately you cannot apply for more than the 2.5 times an average month of payroll. You would be better to apply for the SBA Economic Injury Disaster Loan: https://covid19relief.sba.gov/#/

      As of today, they have streamlined the processed, so it is worth applying for these funds. However, the SBA Economic Injury Disaster Loan cannot be used to refinance your prior loan, you can just make payments on that loan if you get approved.

  12. Hello, thanks a lot for your videos, I’m really grateful for the information you provided. I would really appreciate if you can answer these questions:
    – I’m a restaurant sole proprietor and in the last 12 months I included in my payroll a check for me and my wife for a total of 52k a year but I also receive around 40k in profit at the end of the year (reported on my schedule C). Can I include both, payroll checks and yearly profit in the calculations for the PPP loan amount? It will still be under 100k.
    – my other question is: I laid off all of my 24 employees on March 19 and I’m planning on rehire them but, it seems like I won’t be allowed by city ordinances to open my restaurant until mid may approx. If I get a PPP loan this week, do I need to start paying my employees right away or can I wait to rehire them until I’m allowed to open for business again?. By the way, I do have to pay rent, utilities and insurances during this time that we are closed.

    • 1. They have opened it up for self-employed individuals to be able to get paid, so my impression is that you should apply with the profit distributions to yourself included. Fundamentally, and in alignment with the spirit of the law, you need to be able to pay yourself to keep your doors open and to keep paying your employees. So they allowed self-employed individuals, independent contractors, and sole proprietors to qualify for the “loan”. And if you pay your payroll (which technically should include you and not above the $100k annually), that portion will be forgiven (along with any other qualified business expenses that you spend the PPP money on first). This may be wrong, but it is worth applying for all of it and asking your bank when you apply.

      2. Under the text of the law, the Loan Forgiveness means “An eligible recipient shall be eligible for forgiveness of indebtedness on a covered loan [for] costs incurred and payments made during the covered period” and the term “covered period” means the 8-week period beginning on the date of the origination of a covered loan. So, it seems you would need to spend the money in that 8-week period to qualify for loan forgiveness. While you can still use the funds for mortgage payments, lease payments, or utility payments, doing so may cost you to lose the loan forgiven. As such, you would end up with a loan at a 4% interest rate and up to a 10 year term (depending on the bank’s terms). HOWEVER, the loan forgiveness may come back if you re-hire your employees before June 30th for the loan forgiveness to apply for the time period between February 15 and April 26th.

  13. What if you’re not able to open due to Governor mandates? I own a hair salon in NYS and I’m closed until at least April 15th as of right now. But that may be extended even longer. I have 13 employees. Some full time, some part time. They have all filed for unemployment. Once I’m able to reopen, and hire my employees back, would I be able to use the loan to pay them going forward as well as my rent for the last two months? And does the loan cover part time employees as well as full time? Thank you so much for the information. It’s been so confusing trying to understand everything.

    • Thanks for your questions! It has been quite confusing (even for us lawyers).
      1) The goal of this package is to attempt to keep the unemployment rate down, and allow you to reopen when this crisis has passed. You will have to certify that the loan request is to “support the ongoing operations” and that the “funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments”.

      So once you reopen, you can hire your employees back and pay for rent. But note that the amount of the loan may be decreased if you do not re-hire your employees before June 30th, 2020. But if your business cannot sustain to hire them all back, the money will remain as a loan at 4% interest up to a 10 year term.

      2) Yes, the package may also be used for rent, but you may lose some of the ability to have the loan forgiven if you forego paying your employees to pay rent instead.

      3) The package covers both part and full time employees.

  14. I operate 2 bar/restaurants. I have already had all of my employees file for unemployment because our business has been closed during this ordeal. We were allowed to stay open for take-out, and we tried it for 1 week, but our revenue was not even enough to cover the payroll, let alone inventory or overhead, so we decided to close. Should I be hiring them back and paying them even though they can’t work right now? Also, the majority of our employees are tipped employees, so are the tips they were earning able to be figured in with payroll cost for figuring out how much we are eligible to borrow? If I can only pay them their base pay without their average tip amount, they will not be able to survive and are better off on unemployment until we can re-open. And how many hours per week is being considered a full time employee? We generally only have part-time employees because with tips, they generally earn a decent living with 25 or so hours a week and we generally only have a few hours a day that are extremely busy, so we put extra people on during those times, but it does not add up to full time for anyone. So how will they judge our employees if none were full time before? And as a last question, if we are able to pay lease payments and utilities, but can’t borrow those amounts in addition to the payroll amount, will those amounts be allowed to be forgiven?….and won’t those expenses make it impossible to actually cover the payroll costs…especially if we are closed and have zero revenue coming in? Sorry for the multiple questions…but I am totally confused on what is the best thing to do right now in regards to my employees, and how to hopefully have our businesses survive this.

    • Hi Lori, it has been confusing for everyone, including lawyers.

      1) If you hire them back after being approved for a loan, you may qualify for loan forgiveness under the package. Which means you can keep them on payroll and off unemployment (which is a big motivator behind this bill).

      2) Yes, payroll costs do include tips, so they could be calculated in your payroll costs.

      3) First, the amount you can qualify for will not be affected by whether your employees are full time or part time. Second, once you have the money, full-time employment may have an affect on the amount of the loan that is forgiven. The amount of the loan is forgiven is reduced if you fail to keep the average number of full-time equivalent employees as you had during the same period of time last year (Feb-June 2019). As such, the full-time “equivalent” employees would be the combination of employees that would equal your state’s minimum number of hours to equal full time (it might be between 35 to 40 hours per week).

      The more important aspect is the amount you keep paying those part-time employees. The amount forgiven may be reduced by the amount of compensation that is reduced by more than 25 percent measured against the most recent full quarter (for employees making less than $100k annually, which your part-time employees would be).

      4) Yes, this PPP money is great to supplement your payroll to keep your employees around until you reopen, but it will not take care of everything (since the qualifying amount is only based on payroll and not rent/utilities). If you have to choose to pay rent/ other costs versus payroll costs, that is permissible, however, you could lose that portion of possible loan forgiveness. The point of this program is to protect payroll for displaced employees.

      If the PPP money is not enough, you can also apply for the SBA Economic Injury Disaster Loan: https://covid19relief.sba.gov/#/

      As of today, they have streamlined the processed, so it is worth applying for these funds.

  15. If an employee makes $150,000 in 2019- Do you count $100,000 or 0 to determine the amount available for the loan.

    Is it correct that NONE of the money used to pay this person is forgivable ?

    • 1. The text says payroll costs do not include “the compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period.” You should be able to go up to an annualized rate of pay of $100,000, just not in excess of it.  

      2. The way the text reads:
      “(A) The amount of loan forgiveness under this section shall be reduced by the amount of any reduction in total salary or wages of any employee described in subparagraph (B) during the covered period that is in excess of 25 percent of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period.
      (B) EMPLOYEES DESCRIBED.—An employee described in this subparagraph is any employee who did not receive, during any single pay period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000.”

      So the amount forgiven is also reduced by the amount of compensation for any person making less than $100k/year is reduced by more than 25% measured against the most recent full quarter.  I do not see where none of the money used to pay this person is forgivable, rather it may all be forgivable, if paid properly. 

  16. If my employee count was much higher in 2019 , than today, can i still access the higher dollar amount and add new employees?

    • Great question. As I understand it, yes, you should be able to, but I am not sure the bank would let you. This is what I mean: Under the text of the law, you can “qualify” for up to 2.5x monthly average based on the prior 12 months (which would include your higher employee count from 2019). Just because you qualify does not mean the administrator (i.e. the bank) will approve that amount if you do not currently have the employees on payroll (since the point of the payroll protection program is to protect your current payroll). However, I know the federal government would love to see unemployment rates decrease as much as possible, so you should ask for the full amount and let the administrator know you are going to use it to hire more employees.

  17. Hi Isaac – You’ve definitely addressed similar questions above but I’m not quite able to interpret for my situation, so let me lay this out as an example.

    -Our business is closed as of March 30th.

    -My average monthly payroll in 2019 is $60k.

    -In Jan/Feb 2020 we had 30 Full-Time Equivalents (20 full-time employees and 20 part-time).

    -The 20 Full-Time Employees are all eligible for unemployment benefits in excess of their regular pay under the CARES act but the part-time employees are not.

    -We apply for and are granted a PPP loan of 150k on April 6th

    -We continue to employ only our part-time workers so our monthly payroll reduces to 20k and our Full-Time Equivalents reduces to 10

    – We maintain this for the 8 weeks following April 6th when our business reopens, paying a total of 80k in wages during that time period. We also have 20k of rent paid during this period of time.

    – When our business reopens 8 weeks following April 6th, we staff up back to 30 FTEs

    How much of our 150k loan will be forgiven?

    • Hi Henry, very well written question. I had to use both my law degree and MBA to answer this one. I will still hedge my answer to say this is my interpretation of the law, and given how new it is, the administrator (i.e. bank) still has discretion in certain aspects of the law that could change our entire calculation. But here we go…

      Assumptions:

      A. Initially, you state that the average monthly payroll in 2019 is $60k, which you use to calculate the $150k. Just to be clear, that you use the average total monthly payments for payroll costs incurred during the 1-year period before the date on which the loan is made (April 6th in your case). This may still average out to $60k, but I just wanted to make sure that it is based on the correct amount for calculating the amount to which you could qualify.

      B. Next, I am going to assume you do not decrease the total salary or wages of any employee you decide to maintain during the 8 week period to lower than 25% of the total salary or wages of the employee during your most recent full quarter during which the employee was employed before the covered period. Basically, the employees you do maintain during the 8 week period will be paid the same (or not lower than 25% of what they were being paid in your last quarter).

      C. Finally, you reference the number of full-time equivalent employees for Jan-Feb 2020 and not the full-time equivalent employees for Feb-June 2019 (which you could choose to use instead as a comparison for the calculation in the reduction of loan forgiveness amount if the average number of full-time equivalent employees was lower than Jan-Feb 2020).

      Calculation:

      1. I will move forward under the assumption that it is better to reference the number of full-time equivalent employees for Jan-Feb 2020, which is equal to 30.

      You have stated that the average number of full-time equivalent employees per month employed during the covered period would be reduced to 10 (assuming this remains the same so the average for each pay period remains at 10).

      Divide 10/30 = 33.33%

      2. The amount eligible for loan forgiveness only include qualified expenses: for payroll costs, mortgage obligation, rent obligation, and any covered utility payment, during the 8 week period. In this instance that equaled $100k (80k in wages and 20k of rent), so only $100k would qualify for forgiveness.

      So you multiply the amount that qualifies of $100k by the 33.33% reduction percentage, and $33,333.33 of your loan would be forgivable.

  18. If someone purchased a restaurant in August and had to start layoffs in early March, does the average calculation period start Jan 1 to Feb 29 2020?

    What is the calculation for Full Time employees if you have several Part-time employees.

    • Hi Michael,

      Yes, the average calculation period start Jan 1 to Feb 29 2020 (unless the bank is willing to accept the prior acquisition costs).

      The part-time/ full-time employee does not come into play regarding the calculation of the amount you can qualify for, but there is a calculation regarding a reduction in the amount of the loan forgiven. The amount of the loan that may be forgiven may be reduced:

      1. if you do not keep the average number of “full-time equivalent employees” versus the period from either February 15, 2019, through June 30, 2019, or January 1, 2020, through February 29, 2020, as selected by the employer, or

      2. by the amount of compensation for any individual making less than $100k/year is reduced by more than 25% compared to their most recent full quarter.

      Hopefully this helps!

  19. I make more than 100k/year with an employee of 1. Can I ask for up to the 100k divided by 12 multiplied by 2.5x = roughly 20K of PPP. And as long as I pay that amount via payroll, this is forgiveable? Thank you in advance!

    • You can ask for up to the $100k for yourself and then the cost of payroll for the employee as well. So yes it would be the roughly 20k of PPP that would be forgivable, so long as you are also still paying your employee. A reduction in pay to your employee could result in the reduction of the amount of forgiveness of the loan.

  20. Okay. I work for a company that provides me products to sell to schools. I do not pay the company for these products. I give back to the company a certain percentage of the sales and I keep for myself a certain percentage of the sales. There’s two questions on the application. First Question: Gross Revenues for the Twelve month prior to the date of the disaster ( January 31, 2020 ). Second question: Costs of goods sold for the twelve month prior to the date of the disaster ( January 31, 2020.
    So, I don’t pay the company anything for the products. Products are provided for me and I give back to the company their costs. I then retain my commission.
    So how do I answer these 2 questions ?

  21. First thank you for that information. My question is what if you already applied for a SBA loan? Do you have to take it? Can you not take it and get the PPP loan? And lastly, can you get both? Thanking you in advance

  22. If you pay independent contractors via 1099 in addition to W2 employees, does the 1099 amounts also qualify when calculating the amount available for the loan for the business ? What about the partners that own the business ( They do not receive a W2 nor 1099, only a K1) does the K1 qualify up to 100k per partner ?

    • Thanks for the question!

      The text of the law states: “the term ‘payroll costs’ include the sum of payments of any compensation to or income of an independent contractor that is a wage, commission, income, net earnings…” but not more than $100,000 in 1 year, as prorated for the covered period.

      So if you have an independent contractor on payroll, are they included in payroll costs or does the independent contractor have to apply on their own?

      The SBA has updated the Independent Contractors apply on their own, and are not included in payroll costs.

      Regarding K1s, this has been a tough question to answer because the text of the law is not explicit on this. The text is vague on payments taken as distributions to the owners of an S-Corp. Here is the text from the law:

      “INCLUSION OF SOLE PROPRIETORS, INDEPENDENT CONTRACTORS, AND ELIGIBLE SELF-EMPLOYED INDIVIDUALS.—

      (I) IN GENERAL.—During the covered period, individuals who operate under a sole proprietorship or as an independent contractor and eligible self-employed individuals shall be eligible to receive a covered loan.
      (II) DOCUMENTATION.—An eligible self-employed individual, independent contractor, or sole proprietorship seeking a covered loan shall submit such documentation as is necessary to establish such individual as eligible, including payroll tax filings reported to the Internal Revenue Service, Forms 1099–MISC, and income and expenses from the sole proprietorship, as determined by the Administrator and the Secretary.”

      The text expressly includes “income and expenses from the sole proprietorship”. An “eligible self-employed individual” would include partners receiving distributions, which seems to be “as determined by the Administrator and the Secretary.” (Administrator = bank). So while the text does not expressly address partners as “eligible self-employed individuals” who would be paid for their income and expenses, the bank should consider distributions to those partners the same way they would treat distributions to sole proprietors.

  23. When calculating what average monthly payroll total will be do we add the following things together from 2019 for each employee:

    Gross Wages
    State/Local Taxes
    Health Insurance
    Dental Insurance

    Just trying to clarify what can be included in that total.

    • Gross wage (less federal withholdings) + state/local taxes + group health insurance benefits (so if dental is a part of that then it is included) + any retirement funds + payment for vacation, parental, family, medical, or sick leave + allowance for separation or dismissal + your income.

  24. One of my employees voluntarily left employment with us to accept new position effective 03/26/2000. We did not anticipate replacing that position then as well as now. A prior part time employee is now full time instead. Will there be a reduction of loan forgiveness in this situation?

    • The text of the law regarding “REDUCTION BASED ON REDUCTION IN NUMBER OF EMPLOYEES” states the reduction is based on a decrease of “the average number of full-time equivalent employees per month employed by the eligible recipient during the covered period.” So you had 1 full time and one part time employee, which equals 1.5 Full-time equivalents prior to the covered period. When your part time became a full-time employee, you increased from .5 to 1. So your prior Full-time equivalents would be 1.5 and now you have 1 Full-time equivalents, so your loan forgiveness may be reduced by that .5 Full-time equivalents. Ultimately, your administrator will make the determination as to their calculations for Full-time equivalents for reductions in forgiveness.

  25. In a situation where you rehire employees in a restaurant, I understand that we will pay them based on a past employment history including the small hourly wage and their tips. We are open just for take out now. When people work they will also get new tips on a daily basis. Is this extra money for them or should we reduce their pay by the amount of the new tips they receive?

    • Great question. Remember for Loan forgiveness, you must spend at least 75% of the loan on payroll. So even if you reduce their pay by the amount of new tips, make sure that they are receiving at least 75% of what they were making in the first quarter of this year. The federal government is interested that they remain off of unemployment, and they do not care much if you pay them extra.

      Further, the loan forgiveness provision in the text of the law stated that for Tipped Workers “An eligible recipient with tipped employees… may receive forgiveness for additional wages paid to those employees.”

      Ultimately, so long as you follow the 75% rule, you will have discretion as to how to allocate their payment, and it should be forgiven.

  26. I am a one person S Corp but do not pay myself with a W2. My accountant figures out my tax liability at the end of the year. How do I apply for PPP without a W2. I only have my 2018 taxes for my business and personal taxes All income that is not an expense to the business is shown as my income and I pay taxes on this amount. What do I use to prove to the SBA what my income is if I do not have a W2?

    • Initially, this is stepping into a level of tax guidance that I cannot provide. However, the IRS rules for S Corps state that owners with greater than 2% ownership must take reasonable compensation from the S Corp as a W-2 employee (unless there is an exception your accountant is using). If you do not have a W2, then I would discuss this with your accountant.

      The text is vague on payments taken as distributions to the S-Corps. Here is the text from the law:

      “INCLUSION OF SOLE PROPRIETORS, INDEPENDENT CONTRACTORS, AND ELIGIBLE SELF-EMPLOYED INDIVIDUALS.—
      (I) IN GENERAL.—During the covered period, individuals who operate under a sole proprietorship or as an independent contractor and eligible self-employed individuals shall be eligible to receive a covered loan.
      (II) DOCUMENTATION.—An eligible self-employed individual, independent contractor, or sole proprietorship seeking a covered loan shall submit such documentation as is necessary to establish such individual as eligible, including payroll tax filings reported to the Internal Revenue Service, Forms 1099–MISC, and income and expenses from the sole proprietorship, as determined by the Administrator and the Secretary.”

      The text expressly includes “income and expenses from the sole proprietorship”. An “eligible self-employed individual” would include the amount distributed through an S-Corp, which seems to be “as determined by the Administrator and the Secretary.” (Administrator = bank). So while the text does not expressly address S-Corp owners as “eligible self-employed individuals” who would be paid for their income and expenses, the bank should consider distributions to the owner of an S-Corp the same way they would treat distributions to sole proprietors.

      You should submit what ever documentation you would submit to the IRS to show your income for tax purposes.

  27. Our organizaiton was deemed an essential bussiness and we are looking to apply for the PPP loan. Does our business need to stay open to receive the PPP loan? Also we have had several employees take voluntary leave of absents, would we need to pay them as well?

    • 1. Your business does not need to stay open to receive the PPP Loan. It can be open or only temporarily closed.

      2. In order to have loan forgiveness, you must pay your employees at least 75% of what they were making from last quarter, you must pay the same number of employees, and you must spend 75% of the total amount of funds received on payroll; otherwise, your loan forgiveness will be reduced pro rata.

      The federal government’s main objective for the PPP was to keep people off of unemployment. They do not particularly care whether you are open or not, or whether your employees are working or not, just that they stay off of unemployment.

  28. I received my ppp loan Friday April 10th. I paid my employees while waiting on funding to keep them off of unemployment from March 16- April 1st . Is this forgivable per the cares act ? We were mandated to close on March 15th.

    • The text of the law states “An eligible recipient shall be eligible for forgiveness of indebtedness on a covered loan in an amount equal to the sum of the following costs incurred and payments made during the covered period: (1) Payroll costs. (2) Any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation). (3) Any payment on any covered rent obligation. (4) Any covered utility payment.” The “covered period” means the 8-week period beginning on the date of the origination of a covered loan.

      My interpretation is that it is payroll costs incurred and payments made only during the 8 week period following the loan. So unfortunately, I do not believe that payroll costs incurred and payments made before that 8 week period would not be included.

      However, the final determination for loan forgiveness will be made by your administrator (i.e. the bank). So it cannot hurt to ask your bank if they would consider forgiving that amount.

  29. If you apply for the Paycheck Protection Program loan and reduce your employees hours/pay by 20%. You reinstate to full pay on June 26th, what if any would be the penalties or interest rate change on the loan?

    • The SBA has stated that so long as you pay your people 75% of what they were being paid (and you use 75% of the total amount of funds paid to payroll), then 100% may still be forgiven (just be sure to spend the remainder on qualified expenses, such as rent, utilities, and interest on debts). I would confirm the plan with your administrator (i.e. bank) just so they know what to expect when you have to prove how you used the funds for forgiveness.

  30. If your employees hours/pay are reduced by 20% until June 26 and they file for unemployment for that time under the new rules during this pandemic, are you still given forgiveness for the loan ?

    • Loan forgiveness is left up to the “administrator” (i.e. the bank), and the banks do not want to keep loans at a 1% interest rate. So they will be motivated to forgive these loans. However, they have not provided guidance on how this will happen. However, my understanding is that so long as in the 8 weeks after receiving the funds you have spent 75% on payroll and were paying your people at least 75% of what they were making as of your first quarter of 2020 (which you are), then it should be forgiven. Just keep good documentation showing you made these payments in the 8 week period.

  31. I work for a company in Florida and we were looking to participate in the Short Term Compensation Program through Florida’s unemployment programs. We do not have enough work for all of our employees and do not want to make any additional cuts. We have already slashed their overtime. We have been approved for the loan. Will this hurt our forgiveness portion (besides not being at 100%); or are we able to pay them for furlough days to receive forgiveness?
    These funds are only for 8 weeks?

    • So the driving force behind the PPP loans is to keep your employees off of unemployment. As such, it would reduce your loan forgiveness if you are not paying the same number of employees as you had last year, and/or if you are not paying those employees at least 75% of what you were paying them. Given the federal government’s driving force, they do not particularly care whether your employees are actually working or not, just that they are staying off of unemployment. So the federal government would have you pay your people to keep them off of unemployment for those 8 weeks.

      Yes, the funds (if you want them to be forgiven), must be purchased in 8 weeks after receiving the funds.

  32. We are a construction company that is still operating. We hire union employees out of their respective union halls. If we are still working, do we qualify for the PPP? Can the PPP be used to pay payroll expenses if we are still receiving income currently, but the future may be uncertain? Will the loan be forgiven for this?

    • Hi Chris,
      1. Yes, you may still qualify for a PPP Loan.
      2. Your PPP funds may be used to pay payroll expenses even if you are receiving income. It has been assumed businesses have been injured by the situation.
      3. So long as you follow the parameters (continue paying the same number of employees as last year, and at least 75% of what they were getting paid from last quarter, and you spend at least 75% of the total amount of funds on payroll, all in 8 weeks after receiving the funds, then it should be forgiven.

  33. I work for a company that is currently still in normal working conditions with all employees working regular hours. We have been approved for the PPP loan. If we keep normal operations and normal revenue coming into the business will our loan still be forgiven? If work and revenue comes to a halt, while we have continued to provide our normal payroll for the 8 week period can our employees file for unemployment after this 8 week period and the PPP loan still be forgiven?

    • Thanks Matt, so long as you use 75% of the funds to pay your employees during that 8 week period, then it should be forgiven. After the 8 week period, there is nothing I’ve read that would impact your loan forgiveness if your employees go on unemployment after the 8 week period ends.

  34. I was layed off of work and I am receiving unemployment. Shortly after being layed off my children’s school closed for the rest of the school year requiring me to do home schooling with them. My boss has announced that they are getting PPP and need ALL staff to come back to work because it will benefit the company, I’m under the impression that I have the right to stay home due to being the primary care giver to my children and continue to collect unemployment. How do I tell my boss this? It seems this plan will be a way bigger advantage to their company, but not that great for those of us that don’t make that much money, and are now receiving $600 extra a week!

    • Unfortunately, I am not as knowledgeable with the employee’s unemployment ability; however, in the CARES Act under sec. 2102. PANDEMIC UNEMPLOYMENT ASSISTANCE, the term “covered individual” means an individual who:

      “(i) is not eligible for regular compensation or extended benefits under State or Federal law or pandemic emergency unemployment compensation under section 2107, …; and

      (ii) provides self-certification that the individual is otherwise able to work and available for work within the meaning of applicable State law, except the individual is unemployed, partially unemployed, or unable or unavailable to work because—

      (dd) a child or other person in the household for which the individual has primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of the COVID–19 public health emergency and such school or facility care is required for the individual to work;”

  35. I own a retail store. I have 3 employees including myself. The earliest date i can open is tentatively May 15th. One full time employee makes $40,000 and the other part time makes $15000 and myself $72000. They are actually making more on unemployment then going back to work.
    ($384+$600=$984 vs. $769 regular pay and ($144+$600$=$784 vs $288 regular pay. With this PPP i would have to put them on the payroll as of 5/1 and have them stay home. Where am i benefiting from this loan? It seems like they are better off on unemployment.

    • Hi Keith,

      This is a tough call that many businesses are facing. I have employers who are taking a few different routes with this dilemma:
      1. Some employers are taking the funds and paying themselves and using the rest on qualified expenses (rent, utilities, interest on debt). However, the portion not paid to themselves would not be forgiven, so they are just keeping the 2 year loan with 1% interest rate, with a 6 month deferment.
      2. Some employers are paying their people to stay home (where their employees would have to check to what extent this would reduce their unemployment).
      3. Some employers are giving their employees the option and just returning any funds that are not forgiven.

      My approach has been to take the money and return any that will not be forgiven (unless the 2 year 1% loan would be beneficial)

  36. Is Workers Comp Insurance a forgivable expense?
    Our Workers Comp is approximately 6K per month and we are trying to figure out if it makes sense to take the loan and incur the Workers Comp Expense or let our guys stay on Unemployment, where with the $600 boost they are making more money than if we were to rehire them.

    • I do not believe workers compensation insurance is a forgivable expense. The only insurance premiums described in the text are “group health care benefits, including insurance premiums”. You may check with your Administrator is they would consider workers compensation insurance a type of “group health care benefits”. Specifically, the proceeds of a PPP loan are to be used for:
      i. payroll costs;
      ii. costs related to the continuation of group health care benefits during
      periods of paid sick, medical, or family leave, and insurance premiums;
      iii. mortgage interest payments (but not mortgage prepayments or principal
      payments);
      iv. rent payments;
      v. utility payments;
      vi. interest payments on any other debt obligations that were incurred before
      February 15, 2020; and/or
      vii. refinancing an SBA EIDL loan

  37. Can you use overtime hours to calculate FTE? If an employee work 60 hours in one week does this count for 1.5 FTE. Full Time being 40 hours per week.

    Your thoughts, understanding? Thank you.

    • Clarification – this is in regards to making the FTE number for the Loan Forgiveness. Not in the application.

      • My understanding is that overtime would not count towards the FTE number. However, one twist to this might be whether they use the standard 40 hours a week or the definition of a full time employee under the Affordable Care Act (“an employee who is employed on average at least 30 hours per week”). We have yet to get clarification on this, but may accountants have been using 40 hours a week.

  38. I have a business where I want to recall workers (I produced letters requesting they return from furlough and they have to sign and acknowledge ), however I have several employees who make more under unemployment (fed govt portion) and do not want to return to work (essentially being paid 40hours for about 5 hours of work until stay at home order lifted), would my loan forgiveness be reduced because fte is slightly lower. Would the fact I can show reasonable good faith effort (letter requesting they return to work at pay equal to 100% of there ltm avg (same amount used to compute loan size). Or do a few employees taking advantage of the “drafting error” in the legislation prevent me from taking full advantage of the PPP.

  39. Initially, employees are only eligible for unemployment if they cannot receive money from their employer; in your instance, you are expressly offering employment, so they should not continue to receive unemployment. (Though they may be permitted to stay on unemployment under the expended definition under the CARES Act).

    But I’ll address this question further by first outlining the two forces influencing the legislation and its execution. Initially, the PPP was drafted by the federal government to keep unemployment rates low, so they did not particularly care whether or not your employees were actually working just that they stayed off unemployment. However, the other motivating force in the execution of this law is that loan forgiveness is left up to the “administrator” (i.e. the bank), and the banks do not want to keep loans at a 1% interest rate. So they will be motivated to forgive these loans.

    This brings us to your situation. Unfortunately, it is not a good faith effort, because the federal government did not care whether your people were working or not, just that you were paying them. Now this discuss is specifically for the amount of loan forgiveness. What is most important is that your business functions. That means if you need to hire someone who is willing to work, you may do that. If you need to make a part-time person full-time, then do that.

    From there you have 2 choices: (1) You can pay the people actually working 100%, and the ones who are not working 75% and keep the other 25% for other qualified expenses, or (2) Pay the people working 100%, spend 25$ on qualified expenses, and then either return the rest of the funds or keep it as a loan at 1% over 2 years.

  40. Isaac, this is the most informative page I’ve seen on PPP regulations for restaurants and I appreciate the time you take to reply everyone. My questions are:

    1. I received PPP money last week but the we are not allowed to reopen. My employees make more money from unemployment benefits with the additional $600 per week until July, so can I wait until the $600 runs out and then open and pay them full wages for 8 weeks and still have the loan forgiven?

    2. Tipped employees will not be making the same average. Do I just complement their wages by reporting additional tips in order to match their previous averages during the PPP period?

    3. If it takes me an additional 4 weeks to reopen, can I pay my staff double the wages in order to match their previous salaries and have the loan forgiven?

    Thank you for your time

  41. Hi, thanks for sharing this great information here! I have 1 full time employee that I’ve kept (reduced from 32 to 28 hours) and 3 part time employees (including me at 24 hours). I had to furlough the 2 part times (16.5 and 6 hours per week). So a total of 2.25 FTE. Can I increase my hours and the FT employee to full time and still qualify for forgiveness if I only have 2 employees instead of 4 (as long as the payroll amounts are the same)?

    • Thank you for the question! Under the loan forgiveness language of the law, there is one point in favor of loan forgiveness and one point against. The point in your favor is that they are measuring only FTEs under the “calculation for average number of employees”, so your math should help offset the decrease in the FTEs. However, the point against you is the “reduction relating to salaries and wages” where it states “The amount of loan forgiveness under this section shall be reduced by the amount of any reduction in total salary or wages of any employee . . . that is in excess of 25 percent of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period.” So technically, you have two employees that have reduced hours. The formula for this has been quite convoluted, and I am unsure how large banks (like chase or wells fargo) would be able to track every position.

      Ultimately, you business needs to function, so I would focus on that first and foremost, which may mean just increasing your and the FT employee’s hours, while spending 75% on payroll and the remaining on qualified expenses. I would run the plan past your administrator (i.e. bank) to see if they have any input since they are the ones who will be making the final determination.

  42. My employees are not that eager to return but I continue to pay them a portion of their salary in order to keep them on payroll. I am the owner and I am also an employee. Can I pay myself more than I used to so that I fulfill the 75% rule of payroll expenditure? This will help offset the decrease in payroll of my employees.

    • Thank you for the question. You can pay yourself more but be sure that you do not exceed $8,333.33 per month (which equals $100,000 per year). Further, if you pay yourself more by taking it from other employees, just know that you must:
      1. still be paying the same number of “Full-time equivalent employees” (so 1 full time may equal 2 part-time employees), and
      2. you must pay those employees at least 75% of what they were getting paid the first quarter of 2020, and
      3. Finally, that at least 75% of all of the funds must be used for payroll costs.

      Ultimately, make sure that you are not taking too much from the other employees or eliminating positions, otherwise it could have an effect on the amount of forgiveness.

  43. Can I as the owner of the corporation continue on unemployment while payment my employees through the PPP loan?

    • Thanks for inquiring. In order to qualify for loan forgiveness, you must still be paying the same number of “Full-time equivalent employees” (so 1 full time may equal 2 part-time employees). Ultimately, you could remain on unemployment, but know it could an effect on the amount of forgiveness.

  44. I have studied the PPP a great deal, therefore, most of what I read above I knew already. However, much that I read from a wide variety of sources or see basically say, “As best we can figure out at the moment”, “We are waiting for additional guidance” or they do not have specifics. I had several clarifying questions in regard to the PPP Loan. As more information is released, I want to be sure I do everything correctly and it is unclear, as they release more and more guidance.

    1.I had called and ask about this item at the bank and made 3 calls to the SBA but no answers were available. I therefore, in regard to the number of employees put on the PPP application, simply entered what was on last years W-3, along with the wages from that form. Now it seems, I should have included myself in the number of employees and excluded the number of part-time employees included on the W-3, in regard to the number of employees shown on the PPP application, although I have read it both ways as well. If that is the case, my number would only be 2, myself as a Sole Proprietor and 1 full time employee. That was true for the year of 2019 and is still true for 2020. If this is correct, would I need to adjust that on the application, as it currently shows 3, which was on the W-3? Or perhaps it just needs to be adjusted at the time I send in the forgiveness information. So is 2 the correct number for the employee line on the application in my case and how should this be handled or corrected? This of course, is a concern due to the fact that my FTE is 100% and will not change in any way, therefore, it will not need to be prorated, in my case, regarding FTE calculations.

    2.In regard to Payroll Cost, can you catch people up on payroll not yet paid due to lack of work and funds in past weeks, therefore, enabling a business to pay this catch-up payroll during the 8 weeks and be able to get forgiveness on that amount as well and paying it out of the PPP funds?

    3.Can you simply go ahead and pay the 2 months rent in one check, as well as, pay my sole proprietor amount in one check for the 8/52nds of my Schedule C? This way I would have less checks to keep up with, thereby, making my forgiveness information clearer and more concise.

    4.What if you pay rent and utilities from the past to catch up or even now pay early, but still in the 8 week time frame? As far as that goes could you pay payroll of the 9th and 10th week early and pay it in the 8th week?

    5.Finally, I read the following:

    •a. The borrower must not layoff any employees who were employed as of February 15, 2020.
    •b. The company can bring back employees laid off prior to the PPP loan if they provide back pay for the worker to February 15, 2020.
    •c. The deadline for reinstating and paying workers is June 30.

    Do the above 3 statements mean you must pay them back pay, all the way back to February 15, 2020, to qualify for PPP loan forgiveness or what?

    In regard to 2 and 4 above, I am reading it that you could not do this, due to the fact the cost was incurred outside the 8 week window. However, I am reading on many sites that you can.

    Also, I find it interesting that 8 weeks of course is 56 days, but leases, utilities and health insurance premiums are generally based on months. So they maybe for 59 or 61 days over a 2 months period, yet I never see that mentioned. I assume they are not going to make you prorate those bills accordingly. I hope these questions will be helpful to everyone, I am not only asking for my own situation, but others that I know, dealing with this as well.

    Sorry for any confusion, like you I am sure, I wish they would have made all this a little clearer.

    Thanks for your assistance,

    Anthony

  45. Hi Isaac,

    Great blog post. Thanks so much for taking the time to answer all these questions.

    I have a question re: employers who have received PPP funds and are unable/unwilling to find/create work for their employees, and subsequently refuse to pay their employees at least 75% of their average weekly wages from before the crisis.

    In my specific case I have been on UI, and have received 4:07 of work this week – our first week back to work after being laid off on 3/21. Pay is bi-weekly and the current pay period ends eod today 5/16. My average number of work hours per week for 2019 was approx. 35, and my average number of work hours per week for early 2020 until, I was laid off, was approx 37.

    PPP Funds were received late 5/13.

    Due to my limited work hours this week, I appear to be eligible for UI benefits, but am unsure if I should claim them or not.

    If I do not claim, I am concerned that I will miss out on important benefits for my family. My time-line for submitting my weekly claim is Sunday 5/17 through eod Sturday 5/23.

    In order to receive my weekly UI payments promptly, I have always been submitting as soon as the system allows.

    From your understanding of the PPP provisions, and the details I have provided above, do you think I am eligible for UI benefits this week, and any subsequent weeks when my employer fails to pay me at least 75% of my average weekly wage?

    If yes, how would you recommend I time my weekly UI claim submissions? Should I wait until the last minute each week in order to give my employer the benefit of the doubt? While it is possible that they will come to their senses re: what their obligations are under PPP, I do not want to end up losing money by not working and not claiming UI. Furthermore, they often play fast and loose w/their bookkeeping practices and I would not be surprised if they do not do the right thing willingly.

    Thank you for your help.

    Kind Regards

  46. Thank you so much.

    My small business received PPP loan on 5/7. I got below questions about that.
    Since I received the money on 5/7, I was able to pay my employees for their May and June payrolls, but the actual pay date is 6/5 and 7/5.
    Then, do I have to check alternate payroll period? If so, 5/8-6/30 or any other period?
    Also, May and June payrolls should be over 75% to be forgiven, correct?

  47. I only had part-time employees before furloughing all of us February 1, 2020. I received a SBA PPP loan on May 4, 2020. I have brought back all of us to work immediately after receiving the PPP Loan proceeds. I will be using at least 75% of the loan proceeds for payroll and Employer Pension Plan Contributions. The remainder if any will be for rent for May and June 2020. Will my PPP Loan forgiveness be reduced since I only have part-time employees?

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