Preparing for PPP Loan Forgiveness
Many businesses across the country began to experience some relief as much needed funds were distributed to PPP loan applicants. Part of what makes this program so attractive is the generous forgiveness opportunity connected with the loan. This is the time that borrowers want to ensure they are doing everything they can to maximize their forgiveness amount.
This article details several measures loan recipients may want to consider as they look ahead to forgiveness, including:
The Eight-Week Period
Once the PPP funds hit your account, that starts an eight-week race. To be assured of maximum forgiveness, plan to spend 100% of those funds before the end of the eight-week period. Take some time to plan out how you will budget and allocate these funds once they arrive.
The Headcount Reduction
The amount you manage to pay out in approved costs for the eight-week period determines your maximum forgiveness. But, this can be further reduced due to declines in headcount.
The Salary/Wage Reduction
Whatever forgiveness is left after the headcount reduction math can be further reduced, dollar-for-dollar, for major reductions in wages.
Headcount "Fixes"
The statute includes a “fix” for the headcount-related reduction in forgiveness. The statute also includes a separate “fix” for the salary/wage-related reduction in forgiveness.
Business Realities
Many people these days are fixated on the forgiveness feature of the PPP loans. However, the ultimate objective for those who own and operate such a company will be to protect the long-term health of the business.
-Excerpted from Verill's, PPP Loan Forgiveness: Further Guidance on the Math