June 4, 2020

CARES Act: SBA Loans and the Paycheck Protection Program

Close up hands of businessman signing and stamp on paper document to approve business investment contract agreement.

Legislation aimed at expanded criteria for the use of PPP Loans under the CARES Act, called the Paycheck Protection Program Flexibility Act of 2020, was signed into law by the President on June 5, 2020.

This update to the PPP program makes it easier for businesses to qualify for loan forgiveness. Most significantly, businesses will have an extension of time in which they can use the loan funds and qualify for loan forgiveness.  

Originally, borrowers needed to use their loan within 8 weeks of receiving it, and no later than June 30th. This proved to be a huge challenge for most borrowers who were limited in their ability to return to regular business operations while the coronavirus pandemic continued and closure orders remained in place.

The updated law has much more flexibility regarding when businesses need to use their loan funds. Borrowers can now qualify for loan forgiveness based on using the funds over a 24-week period. The 24-week loan period starts on the date of loan origination, but has to end no later than  December 31st. Note that if you were able to (or are on track to) use the funds within the initial 8-week, you are still able to get forgiveness based on those parameters. 

Another challenge borrowers faced was the requirement that they spend at least 75% of the loan on payroll expenses. That threshold has been reduced to 60%. Along with the extended loan forgiveness period, this allows many borrowers to direct funds toward other business expenses: “for 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), any payment on any covered rent obligation, or any covered utility payment.”

Of course everything in the law isn’t good news. While they did reduce the amount of payroll expenses to 60%, that is now an absolute minimum that has to be met to receive any loan forgiveness. Previously, if employers didn’t meet the 75% payroll threshold the amount of loan forgiveness would simply be adjusted. Now, spending at least 60% on payroll is a minimum threshold item to get any forgiveness. However, the repayment period of any portion of the loan that is not forgiven has been increased from 2 years to 5 years. 

Businesses continue to be able to get full loan forgiveness even if they are unable to bring all staff back to work. If an employee declines a good faith return to work offer, and the employer isn’t able to replace them, that won’t negatively impact loan forgiveness as the staffing change was outside the employer’s control

In addition, loan forgiveness won’t be denied if it is not possible for the business to return to its prior level of activity due to complying with HHS, CDC, or OSHA requirements/guidance. For example, if you are a healthcare provider but are only permitted to open for emergency, non-routine visits, you may not be able to bring back your full staff at full-time hours. If you are a restaurant, your state may only permit you to operate at 50% capacity due to safety and social distancing rules. These restrictions won’t negatively impact your loan forgiveness eligibility.  

We expect further SBA updates on their guidance under these new rules, particularly as to how to document a change in staffing levels. You can also read a summary provided by CEDR’s CPA partners, Cain Watters & Associates and watch for ongoing COVID-19 updates from those experts.

 

Guidance from the Department of the Treasury Available

The federal government’s  ‘third phase’ of emergency legislation, called the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)in response to the present outbreak of coronavirus/COVID-19 addressed the economic impact of the pandemic and provided financial relief for affected businesses.

You can read the law in its entirety here. We also provide general guidance and answer common questions about the sections of the law that are especially important to your business and employees below. 

Use the following links to find more information on the U.S. Department of the Treasury’s preliminary guidance and the application for the PPP loan

The new guidance makes very clear that this loan is designed for businesses that are open and have all or most employees actively working, but are generating a decrease in revenue. 

The loan helps you pay your employees’ salaries when you need them to be working. You really want to be ready to reopen with your full staff when you use this loan, as at least 60% of it must be spent on payroll to be forgiven. 

If you are currently closed, you may not want to apply for a PPP loan just yet. As a reminder though – work with your own CPA, banker, or other financial planner to determine the best course of action for your business. We are hearing that many banks aren’t prepared to process these applications yet, in part because we are still waiting on the SBA to issue their own guidance. However, the SBA has released a list of the 100 most active SBA 7(a) lenders

Here are some important dates for those who do wish to apply for a PPP loan:

  • Applications open on April 3, 2020 for small businesses and sole proprietorships. 
  • Applications open on April 10, 2020 for independent contractors and self-employed individuals.
  • The application period runs through June 30, 2020. 

The Department of Treasury guidance also confirmed some details of the loan. Interest will accrue at a rate of 1.0%. The loan maturity will be 5 years. Money has to be used for qualified expenses, and only 40% of the forgiven amount of the loan may be for non-payroll costs.

Another important update from the government is that you cannot apply for this program again through the end of 2020. So if another round of PPP funding is released in later months, you cannot participate in that if you take a loan now. 

For much more specific information and guidance regarding what is now known about the PPP loans, we recommend watching this video, presented by CEDR’s CPA partner, Cain Watters and Associates. In that video, CWA Partners Dan Wicker and Hunter Satterfield discuss:

  • Available guidance by the Department of the Treasury
  • A lesson in Banking
  • The loan forgiveness process
  • Interest and maturity figures
  • Important dates for the application process
  • How to use these funds strategically for your business

Watch the Cain Watters Video Now

Note that CEDR cannot provide financial planning advice to you or individual guidance on the loans. Please work directly with your CPA, banker, or other financial advisor on how to make the right business decisions for you.

 

Paycheck Protection Program (PPP Loan)

These are forgivable loans that can be used to cover payroll costs once your business reopens.  

Before we give you the details of this program, it is important to clarify one thing: Don’t depend on the PPP loan to cover your current payroll costs or any payroll costs incurred before you get the loan.  

Many of you are making important decisions about whether to reduce your employee’s hours or furlough them, as well as whether you can continue to provide paid leave benefits and insurance coverage during a full or partial office closure. These decisions should be made based on your current funds — not the funds you will have after receiving a PPP loan. These loans are being provided to help employers cover payroll costs once they reopen — they won’t be much help if you have to use it to cover payroll costs you’ve already incurred. 

Of course, we are not financial advisors, and you should definitely speak to your CPA about your specific financial situation, but this is an important point to consider as you plan your future through this crisis. 
 

Related Reading: Unemployment Eligibility Expanded Under the CARES Act

 

When is the deadline to file for a loan under the Act?

June 30, 2020

 

Which employers are eligible for a loan?

Employers with 500 employees or less who:

  1. were in operation on February 15, 2020; and
  2. had employees for whom they paid salaries and payroll taxes or independent contractors for whom they reported on a Form 1099–MISC.

For this purpose, ‘employee’ includes individuals employed on a full-time, part-time, or other basis. 

Sole-proprietors, independent contractors, and other self-employed individuals are eligible for loans. 

Businesses with more than one physical location that employs no more than 500 employees per physical location in certain industries are eligible.

No personal guarantee, collateral, or credit elsewhere test will be required. 

 

What is the maximum loan amount I can receive?

Loans will be calculated by multiplying the average total monthly payroll costs incurred during the 1 year period before the date on which the loan is made by 2.5 — up to a maximum of $10,000,000.  What this means is that employers will be able to get a loan equal to 250 percent of a single average month of payroll. 

There are special exceptions in the law for seasonal employers.

To start prepping your paperwork to file for this loan, please read this letter from CPA Firm Cain Watters and Associates.

 

What can I use the loan to pay for?

The loan can be used to pay for payroll costs, which includes:

  1. payroll support, including paid sick, medical, or family leave, and costs related to the continuation of group healthcare benefits during those periods of leave;
  2. employee salaries;
  3. mortgage payments;
  4. rent (including rent under a lease agreement);
  5. utilities; and
  6. any other debt obligations that were incurred before February 15, 2020.

 

Will there be any loan fees?

The law waives both borrower and lender fees for participation in the Paycheck Protection Program and it ensures borrowers are not charged any prepayment fees. 

 

How quickly can I get a loan?

This is still unclear.  However, loans will be available through more than 800 existing SBA-certified lenders, including banks, credit unions, and other financial institutions. The  Small Business Administration (“SBA”) will also be creating a process to bring additional lenders into the program as quickly as possible. We will update this post when more information becomes available.

 

What will I need to do to get the loan?

The law requires eligible borrowers to make a good-faith certification that the loan is necessary due to the uncertainty of current economic conditions caused by COVID-19; that they will use the funds to retain workers and maintain payroll, lease, and utility payments; and that they are not receiving duplicative funds for the same uses from another SBA program. 

No personal guarantee, collateral, or credit elsewhere test will be required. 

Repayment ability (which is impossible to determine during a crisis) will not be considered in determining eligibility for the loan. 

 

When do I have to start paying off the loan?

You may never have to pay off the loan, as many employers will be eligible for complete loan forgiveness under the law (read more about loan forgiveness in the next section). 

Loan payments can be deferred (including principal, interest, and fees) for 6 months..  

The loan will have a maximum maturity of 5 years from the date on which the borrower applies for loan forgiveness. The interest rate on the loan will be 1.0%percent.

Related Reading: Families First Coronavirus Response Act Guidance and FAQ

 

Can the loan be forgiven?

Yes, employers who receive loans under this law are eligible for loan forgiveness, as long as they (1) use the loan to cover payroll costs and prior debts, (2) maintain their employees, and (3) maintain the rate of pay of their employees. 

    1. Employers can receive loan forgiveness for an amount equal to the cost of maintaining payroll during the 24-week period after the loan was originated.  Payroll costs can include payments made on debt obligations (mortgages, rent, utilities) that were incurred before February 15, 2020.  
      • Payroll costs do not include:
        • the compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the 24 weeks after the loan is originated
        • taxes imposed or withheld by the Internal Revenue Code during the 8 weeks after the loan is originated
        • an employee whose principal place of residence is outside of the United States
        • qualified sick leave wages for which a credit is allowed under the Families First Coronavirus Response Act
        • qualified family leave wages for which a credit is allowed the Families First Coronavirus Response Act.
    2. The law is intended to encourage employers to bring employees back on payroll once they receive the loan. The amount of loan forgiveness you are eligible for depends on the average number of full-time employees you have on payroll during the 8 weeks after you receive the loan compared to the average number of full time employees you have on payroll between February 15, 2019 to June 30, 2019 OR January 1, 2020 to February 29, 2020. You get to pick the time period to which you would like to have your current employee count compared.We know that’s confusing, so please be sure to work with your financial planner to determine the specifics for your business. You should talk to your CPA about what the best timing is for your business to apply for, accept, and start using the loan, as well as when you will want to bring back on any employees you have laid off.At this time, the best information we have says that borrowers can apply and be approved for the loan, but that you can defer accepting it and starting the 8 week period.
      1. Do I have to bring everyone back at once?No. You can bring the number of people on that makes sense once you start back up and keep others on unemployment. The law gives you until the end of your 24-week forgiveness window. So, if by the end of the 24 weeks you bring back 8 of 8 of your employees, that will satisfy that part of the forgiveness equation.
      2. Do I Have to bring back the same employees?No. HOWEVER, we would like to caution that there are job protections in the Act. If an employee can not return or refuses to return, you can hire someone else and that would count towards your forgiveness amounts. If your office is under a mandatory closure order, full or in part, and most, if not all of your employees, are on unemployment and cannot work from home, then it might make sense for you to hold off on getting the loan until it looks like you will be able to reopen to the public.

 

What information will I be required to provide to qualify for loan forgiveness?

The employer must submit documentation verifying the number of full-time equivalent employees on payroll and their pay rates during relevant periods of time. This includes:

  1. payroll tax filings reported to the Internal Revenue Service;
  2. State income, payroll, and unemployment insurance filings;
  3. cancelled checks, payment receipts, transcripts of accounts or other documents verifying payment on debt obligations (mortgages, leases, utilities) incurred before February 15, 2020; 
  4. A certification that the documentation presented is true and correct and the amount for which forgiveness is requested was used for appropriate purposes under the law; and
  5. any other documentation the Administrator determines necessary.

 

What is the best way to track all this time?

CEDR Members have access to a robust timekeeping system that can help track a number of important metrics associated with your office’s temporary shutdown and loan forgiveness. That system is built into your HR Vault Software. 5 employee seats are included with the cost of membership; additional employees are $1.50 per employee per month. Request a demo of the system or schedule a time to customize your timekeeping system for your practice.

Not a CEDR Member? Try the HR Vault free for 90 days

 

What about other SBA loans?

There are EIDL loans available right now which are not the PPP loan. Those loans are not forgivable and much has been made about a $10,000 forgiveness component within the EIDL loan program. 

Sound too good to be true? For more on that, please read this blog post from our friends at the financial planning firm Cain Watters and Associates

 

When will we know more about this law?

The Administrator must provide additional guidance and regulations on the loan forgiveness portion of the law within 30 days of enactment. Please note that the law is over 800 pages long, and that our legislative team is working in consultation with other experts to stay informed as information develops. As we learn more, we will continue to update our guidance on this subject.

 

Related Reading

Practical Guidance for Employers Handling the Coronavirus Outbreak

Families First Coronavirus Response Act Guidance and FAQ

Unemployment Eligibility Expanded Under the CARES Act

Remote Work Checklist for Employers

Comments have been temporarily disabled, as we are focusing on responding to questions from our existing CEDR HR Solution Center members. If you would like to learn more about becoming a Solution Center member to gain access to our team of HR professionals, please email us at info@cedrsolutions.com

This blog was updated on June 4, 2020; originally published April 1, 2020.

Friendly Disclaimer: This information is general in nature and is not intended to provide legal advice or replace individual guidance about a specific issue with an attorney or HR expert. The information on this page is general human resources guidance that is believed to be current as of the date of publication. Note that CEDR is not a law firm, and as the law is always changing, you should consult with a qualified attorney or HR expert who is familiar with all of the facts of your situation before making a decision about any human resources or employment law matter.

Comments

  1. AvatarJoseph Kofron says

    so if we do not return to work after June 30 will we need to take the loan by June 30th regardless or is June 30 just the last date to submit for the loan. Will we still be able to take the loan and go 8 weeks even if they push our work date back past June 30th.

    Thanks,
    Joe

    • AvatarCEDR Solutions says

      We’ll have to direct you to a CPA or banker for additional help with the terms of these loans. We will provide additional updates here as they become available, of course, but we are not able to offer guidance on anyone’s specific financial situation since our area of expertise is HR. You might find luck crowd-sourcing an answer for this question in our private Facebook group, HR Base Camp, though. There are over 6500 practice owners and managers in there at this moment and there is a lot of discussion going on about this topic.

  2. Avatar says

    To CEDR and each one of their team members ! Thank you for the support and guidance you all have provided.
    Wishing you all health during this time.

    • AvatarCEDR Solutions says

      Thank you! We hope you are finding it helpful. Wishing you and yours health and safety, as well.

    • AvatarCEDR Solutions says

      This is CPA and bank territory. We can’t really offer guidance on the PPP loans beyond what is provided in this blog, though you are more than welcome to join our private Facebook group, HR Base Camp, to see if anyone in there is able to offer any additional information about this situation.

  3. AvatarGeorge Zaibaq says

    We already applied on line for the SBA loan.
    Not through a bank. Is that loan forgivable? When shows get an answer and funds ?

    • AvatarCEDR Solutions says

      We can’t speak to any loans that you have already taken out, but it looks like the PPP loan process is still being finalized. Your best bet will likely be to reach out to whoever provided that loan for additional information about it and speak to a CPA about all of your options moving forward. You can also join the discussion in our private Facebook Group, HR Base Camp, to see if any of your peers and colleagues can help fill in the gaps.

  4. Avatar says

    I am interested in becoming a client. Can you have someone contact me to discuss when it is convenient.

    I can also be reached at 805-501-0801 (cell).

  5. Avatar says

    Great job, Paul and your team. Over the past 10 days, I have spent more time reviewing the data from companies and individuals then I have doing dentistry. BY FAR AND AWAY, CEDR has been the best, most reliable source of information , as well as the most timely. You have been going over and above what would be expected from an HR company. INVALUABLE!!!!Thank you so much for all of your efforts!

    • AvatarCEDR Solutions says

      Glad it’s helping and glad you found us! It’s been a whirlwind but it’s good to know the work is making things just a little bit easier.

  6. AvatarVandana Dharmapuri says

    1. Do I need to borrow the full 2.5 x average annual payroll or can you borrow less. I’m trying to ensure all the money gets spent during the 8 week period to ensure forgiveness

    2.Origination of loan and hiring back the employees which one precedes which and how far apart can the time spacing be?

    • AvatarCEDR Solutions says

      These questions are better asked of a CPA or banker as we cannot really offer any financial guidance, unfortunately. Our area of expertise is on the HR side of things and this piece of legislation is a bit outside of that scope. You can ask your peers and colleagues how they are dealing with all of this new information in our private Facebook Group, HR Base Camp, however. You may find valuable insights from the more than 6500 members of that group.

  7. Avatar says

    Are you saying if I paid myself more than $100,000 in 2019 I would not be eligible to include myself in this plan but employees under the $100,000 mark are eligible?

    • AvatarCEDR Solutions says

      Specifics regarding the loans, what they can be used for, and your practice’s eligibility for them are best posed to a CPA or banker as we are not able to provide financial advice to business owners. You are welcome to join our Facebook Group, HR Base Camp, to pose questions to your peers and colleagues in there. Lots of people have questions about this legislation and there is a lively discussion taking place on the subject there.

    • AvatarCEDR Solutions says

      Great news! We can’t advise on how to handle these loans (that’s work for your CPA and/or bankers) but we’re happy to help with any HR needs you might have 🙂

  8. AvatarMicah Bickel says

    I just purchased a practice and building in February 2020. February 24th was the closing date. Does this mean I am not able to apply for this PPP loan. I feel like I am in the most vulnerable position of all and am not receiving any benefit or protection from this arbitrary date of February 15 2020. I created the dental practice entity for this practice in 2019, but again the sale was not completed until 2/24/20. The real estate entity that purchased the real estate was created in 2016. This new practice building is the 2nd property that was purchased under that real estate entity. I am really hoping to be able to access this PPP loan as this new practice has a staff of 10 people. And total new debt service of 1.5M for the new dental practice and building. Any insight would be much appreciated. Thank you!

    • AvatarCEDR Solutions says

      I’m sorry to hear about the stress you’re dealing with right now. I wish we could offer more information, but questions about these loans are better suited for a CPA or banker as we focus primarily on HR and management concerns here at CEDR. You are welcome to join our private Facebook Group, HR Base Camp, of course. You may well be able to find more answers to your concerns from everyone talking about loans in that group right now. Wishing you the very best of luck in this incredibly difficult time.

  9. Avatar says

    SBA loan foregiveness (PPP): one of the conditions is to rehire the same number of employees on reopening. Does this apply only to full time employees or must part time employees be rehired also?

    • AvatarCEDR Solutions says

      Any further questions about the SBA Loan program are best suited for your CPA or bank. As an HR company, we are not really in a position to offer any more guidance on this subject. You could also join our private professional Facebook Group, HR Base Camp, however, and see if the more than 6000 professionals in there can help clear up any confusion.

    • AvatarCEDR Solutions says

      As far as advising on the specifics of how these loans apply to your business, that’s better left to your CPA and bank. As an HR company, this blog is about as far as we can go on the subject of PPP loans. I would encourage you to join our Facebook Group, HR Base Camp, however, as there are more than 6000 of your peers and colleagues on there discussing this and other similar topics.

  10. AvatarTasha says

    My employer just emailed us and let us know they are considering getting one of these loans. I am very confused because I live in a state where you are allowed to apply for unemployment if you have reduced hours. I did apply for unemployment because my hours were reduced from 25 to 7 the first week, and then 0 for the last two weeks. My employer never actually “laid” me off though. I was simply just not put on the schedule (I work in home health and our families are currently refusing services but theoretically I would go back on my clients once they felt comfortable allowing us back in the home).

    How would my employer getting this loan impact my ability to have unemployment? Would I only stop filing once they were approved? What is my average salary based on? My hours have been short due to illness in January and February, but were higher in the Fall. If my employer pays me for 8 weeks and then families STILL don’t want us back in the home, would I then be able to go back on unemployment? If she kept me on the payroll but at 0 hours (or even 5 hours!), would that still allow her to have the loan forgiven later on and would I be able to supplement low hours with unemployment again? It seems convoluted.

    • AvatarCEDR Solutions says

      CEDR works directly with employers and managers, and does not typically advise from the employee perspective. Having said that, as an employee, you don’t need to worry much about whether your employer gets the PPP loan or not. Until your employer restores you to your normal schedule, you should continue to seek unemployment benefits. We cannot guarantee that you will be eligible or how much you will receive, but you might as well continue to apply while you have reduced hours. Continue to provide accurate information and declare any wages/hours you are receiving from your employer.

  11. Avatar says

    Can we include any/all employer related taxes (ie employer social security and medicare matching, state unemployment taxes, federal unemployment tax, etc) in calculating the payroll expenses?

    • AvatarChristina Bettenhausen says

      My bank told me today that no, it does not include the employer portion of payroll. Just the gross total and any benefits for the employees, like healthcare, sick pay, etc.

      • AvatarCEDR Solutions says

        No doubt there are plenty of people in our community that will benefit from this info — thanks for the update !

      • AvatarCEDR Solutions says

        As an HR-focused company, we’re not able to offer financial advise with respect to this loan program. You’ll need to work with your CPA and banks on this one. If you are an owner or manager of a dental or healthcare practice, you can also join the discussion and ask additional questions on our private, professional Facebook forum, HR Base Camp. There are nearly 7000 professionals in that group right now and many are discussing the impact and processes associated with these loans.

    • AvatarCEDR Solutions says

      Since we specialize in HR and not finance, we can’t really offer any advice on the loan process aside from the content of this blog. You should ask your CPA directly about how involved you need to be with the loan application process. If you are an owner or office manager of a dental or healthcare practice, however, you are welcome to join our private, professional Facebook forum, HR Base Camp and pose this question to roughly 7000 of your peers.

  12. AvatarDavid says

    New Treasury Dept. guidance states “agents” must receive their fees from the lender, but I also know some CPAs who are not considering themselves “agents,” and simply charging a flat fee directly to the lender to gather the information and prepare the application. Is this an acceptable loophole?

  13. AvatarKeyurkumar patel says

    So payroll taxes are not included correct? only net pay amount of payroll is included?

    • AvatarCEDR Solutions says

      Financial legislation isn’t really our area of expertise, so this is a question you should pose to your CPA or banker. Anecdotally, however, it does appear that employers are still going to be held responsible for payroll taxes and that such payments will not be forgivable under the terms provided by the Department of the Treasury. If you are an owner or manager of a dental or healthcare practice, you can join the discussion and ask additional questions on our private, professional Facebook forum, HR Base Camp. You might find additional help from the members of that group. Hope this helps!

    • AvatarCEDR Solutions says

      You’ll need to touch base with your CPA and bankers on this for specific guidance related to your business but, as far as we know, no personal guarantee, collateral, or credit elsewhere test will be required to apply for a loan. If you are an owner or manager of a dental or healthcare practice, you can join the discussion and ask additional questions on our private, professional Facebook forum, HR Base Camp. 7000 of your peers and colleagues are in that group already and many are discussing questions much like this one. Hope this helps!

  14. AvatarAdam Boyle says

    My boss is telling everyone that we will be getting this loan, but we have been sitting at home for over a month and will continue to be home for another month. He claims we will still be filling out our time cards to get our 40 hours and he will be paying us our full wages even though we’re sitting at home. This doesn’t seem like what this loan is meant for. Am I wrong?

    • AvatarCEDR Solutions says

      Our area of expertise is actually advising employers on HR issues, so we can’t really speak to the employee side of things, nor can we advise on financial matters. We are advising our employers to work closely with their financial advisors/CPAs to ensure that they’re acting in compliance with the terms of the loan.

  15. AvatarMichael says

    Any thoughts on small businesses who have grown over the past 12 months? In March 2019, I had 3 employees. Now I have 8. The ‘average’ payroll won’t allow me to keep them all employed at my current payroll rates. How do I calculate my monthly rate in this scenario?

    • AvatarCEDR Solutions says

      This is a little bit outside our scope of expertise as an HR company and is more a question you will want to ask your CPA or bank. That said, it seems like the loans are issued based on the average cost of payroll over 12 months, so you may not be able to payout your entire average payroll at your company’s current size during any down time. You’ll want to be mindful of those figures when calculating the hours that are available for your team to work based on your available loan, should you apply for one, and instruct your team to apply for unemployment benefits to cover the difference for the time being. If you are an owner or manager of a dental or healthcare practice, you can also join the discussion and ask additional questions on our private, professional Facebook forum, HR Base Camp. You’ll find more than 7000 of your peers and colleagues asking and answering questions very similar to this one in there. Best of luck and stay healthy!

    • AvatarCEDR Solutions says

      New employee payroll needs appear to satisfy the loan expenditure requirements. In other words, there is no requirement to rehire all the same employees after you receive the loan.

      The amount of loan forgiveness you are eligible for depends on the average number of full-time employees you have on payroll during the 8 weeks after you receive the loan compared to the average number of full time employees you have on payroll between February 15, 2019 to June 30, 2019 OR January 1, 2020 to February 29, 2020 (the applicable time period is your choice).

      Therefore, it looks like it would be to your advantage to have more employees after you receive the loan than you had before this crisis started.

      The guidance on this blog is not a substitute for professional financial advice, however, so you’ll want to double check with your bank and/or CPA as to how all of these items will affect your loan and forgiveness eligibility.

      If you are an owner or manager of a dental or healthcare practice, you can also join the discussion and ask additional questions on our private, professional Facebook forum, HR Base Camp.

  16. AvatarGARY WAYNE CARTER says

    What specific guidance are you relying on when you say in the April 1 article, “At this time, the best information we have says that borrowers can apply and be approved for the loan, but that you can defer accepting it and starting the 8 week period.” My banker thinks funding must be immediate upon approval.

    • AvatarCEDR Solutions says

      At the time this post was written (April 1, 2020), the only available guidance on the PPP Loan process was coming from the Department of the Treasury. At that time we were still waiting on guidance from the SBA and individual lenders. If your banker is telling you that you cannot defer payment, you should follow their guidance.

  17. AvatarJay says

    Hello and thanks for the info. So I have a question from the opposite side of things. I am an employee. Some of the work our company does is considered “essential” but not everything is. My employer is talking about trying to get this loan. He says if he gets the loan then he will have to have all of us come into the work shop to keep busy if we don’t have “essential” work, so we have 40 hours at the end of the week. Whether that means cleaning the shop, painting the office, blowing leaves outside, basically anything to get in hours. But to me I thought we were supposed to be staying home unless “essential” work was needed.

    • AvatarCEDR Solutions says

      Hello! Thanks for reaching out. As an HR company, our guidance is generally limited to the employer side of things. As a result, we cannot provide much insight on this question other than to say that whether or not your work is considered essential will depend on where you live and the specific language of any stay-at-home order that applies to your location.

  18. AvatarMatt Rathbone says

    I have some employees that filed for enhanced unemployment. We anticipate getting back to work next month. We will start our PPP then. However they are making more on enhanced unemployment than they will from me. Could be as much as 200% higher. I am concerned they won’t come back. Are they required to come back or was this bill written with this loop hole. I may not be able to use the allotted money on payroll during the 8 week period.

    • AvatarCEDR Solutions says

      We actually answer that question on our blog about Expanded Unemployment Eligibility. It says:

      “Don’t worry! Once you are ready to reopen your company and you offer the employee their full hours again, they will no longer be able to receive unemployment benefits. So, you don’t need to worry about how you will get your employees to come back to work if they are being paid more not to work.”

      • AvatarMichelle says

        What if your employer received the loan but is not open for business? But still want to bring people back to work?

        • AvatarCEDR Solutions says

          If, for some reason, the company is offering employees their full hours again despite remaining closed, the employees would still likely not be able to continue collecting unemployment benefits.

      • AvatarLynne B says

        My husband manages a motel in central New York. He was told by unemployment that his employees who filed for this, that they would continue to receive the extra COVID 600.00 a week even though they are back to work.Until the program ends in July. This is very dis concerning for all the other employees.

        • AvatarCEDR Solutions says

          It’s true — anyone collecting unemployment during the COVID-19 lockdown will be getting an extra $600 a week to help them cover their lost wages. That includes people who are entitled to UI benefits as a result of being “underemployed.” This is a lot of money for lower-paid employees. We have heard about employees who have continued working full-time during the lockdown feeling frustrated at the prospect that some people who are working fewer hours might be making more money than they are as a result of supercharged UI. That said, those benefits are temporary and being on unemployment does not mean that employees can simply refuse to work in favor of collecting UI. See our blog on employees refusing work in favor of unemployment for more information.

  19. AvatarCharlie says

    Three similar questions, all regarding PPP and unemployment.
    1. Can an employer reduce a full time employee (40 hrs ) by 25% to 30 hrs; put them on partial unemployment, and still count them as a 1.0 employee for ppp forgiveness purposes?
    2. Same question but the employee normally gets 50 hrs. Reduce them by 25%, which is more than 40 hrs and them draw partial unemployment?
    3. SAME but the employee is on salary. Reduce them 25%, remaining above $684 and put them on partial unemployment and still count them as 1.0 towards ppp forgiveness?

    • AvatarCEDR Solutions says

      With regard to unemployment, those benefits vary on a state-by-state basis, so you will need to talk to your state unemployment office for details on how your local program works. You can find a link to your state’s office on our Coronavirus Resource Page. Concerning loan forgiveness, as an HR Company, we can’t advise on financial matters, so you’ll need to go over these figures with your CPA and/or bank to determine the terms for forgiveness of any loans granted to your business. Stay safe and best of luck!

  20. AvatarJohn kellam says

    Can I start the employee payments when I can open the Dental office. Start the 8 week for employees when I can open the practice. Or must I use when the pp. loan amount has been made available and deposited in my checking acct
    I need some of the monies now for rent utilities etc

    • AvatarCEDR Solutions says

      Specifics about loan requirements are best posed to the lender providing those funds and/or your CPA. If you are an owner or manager of a dental or healthcare practice, you can also join the discussion on our private, professional Facebook forum, HR Base Camp and try to crowdsource some answers from 7000 of your peers and colleagues.

  21. AvatarLaShenda says

    Good Afternoon,

    I would like to know on the PPP Loan does the number of people and wages must be the same during those 8 weeks or is it focused on wages amount and not bodies. Please advise

    • AvatarCEDR Solutions says

      We explain the following in the blog above:

      The law is intended to encourage employers to bring employees back on payroll once they receive the loan. The amount of loan forgiveness you are eligible for depends on the average number of full-time employees you have on payroll during the 8 weeks after you receive the loan compared to the average number of full time employees you have on payroll between February 15, 2019 to June 30, 2019 OR January 1, 2020 to February 29, 2020. You get to pick the time period to which you would like to have your current employee count compared.

      We know that’s confusing, so please be sure to work with your financial planner to determine the specifics for your business. You should talk to your CPA about what the best timing is for your business to apply for, accept, and start using the loan, as well as when you will want to bring back on any employees you have laid off.

      The amount of loan forgiveness you are eligible for will also be reduced by the amount that you reduce any employee’s wages in excess of 25 percent. This part of the law does not consider any employee that made wages or salary at an annualized rate of pay in an amount more than $100,000 during any single pay period during 2019. To determine whether an employee’s wages were reduced, the DOL may compare the employee’s wages during the 8 week period after loan origination with the most recent full quarter during which the employee was employed before the loan was originated. At the time we write this, we are not sure how this will be validated.

      IMPORTANT: Your loan forgiveness will not be affected if you reduce staff or wages between 2/15/20 and 4/26/20 if you eliminate the reduction in staff or wages by 6/30/20.

      Again, we’re an HR company, not financial advisers, so you’ll want to work out the specifics concerning your business with a CPA or banker. Best of luck!

  22. AvatarPhil Worthen says

    Do we have to pay any portion of FICA (6.12%, 1.45%) towards my employees’ payroll expense during this period? Or is the employee and employer matching portion of payroll expense waived during this period?

    • AvatarCEDR Solutions says

      This is definitely outside the scope of our advice and is getting too much into the tax weeds for an HR company. You”ll need to reach out to a CPA on this one.

  23. AvatarCarl Dudde says

    We are a small business that works from home. We have received a SBA Payroll Protection but from our calculations we are going to fall short of the 75% payroll threshold. What are our options to reach this threshold? We our considering giving a 3-5% raise to reach the threshold? Or can give ourselves a distribution check for the amount needed?

    • AvatarCEDR Solutions says

      As an HR company, we are not really in a place to offer financial advice related to the use of SBA Loan funds. You’ll want to work with your CPA or bankers to come up with a plan that works for your business. That said, there is no law stating that you have to use all of the funds allocated for your business. If you fall short of the threshold for forgiveness, you could just return the unused funds to your lender so that you aren’t on the hook for interest on those funds. But, again, you’ll want to talk this out with your financial advisor to determine your best course of action.

  24. AvatarMike says

    I am a single member llc. they just decided to give me unemployment. Can I take this loan and put it toward my own payroll while on unemployment? Is there anything written about this?

    • AvatarCEDR Solutions says

      You’ll definitely want to have this conversation with your CPA or bankers. From the phrasing of the question, it sounds like you may be trying to pay yourself from payroll with PPP funds on top of receiving UI. Is that correct? If so, whatever you pay yourself needs to be reported to your state’s unemployment office, and that will most likely impact your unemployment eligibility.

  25. AvatarMichelle says

    What happens when your employer receives this loan but is still technically closed due to the stay at home order in Virginia. However wants to bring employees back to work. Do the employees have to return to work if there place of employeemnet is considered non essential?

    • AvatarCEDR Solutions says

      In general, we are recommending that everyone comply with stay at home orders, this includes employers and employees. If the stay at home order in your state prevents you from legally going to work, you may want to express this to your employer

  26. AvatarAdam says

    I have a small business in Manhattan with 9 employees. Most of them are making considerably more collecting unemployment than they would be if I put them back on payroll thanks to the extra $600/week. My PPP loan is coming in this week and several employees have asked to stay on unemployment until we actually reopen which likely won’t be until June in NYC. Question is – can I still spend the 25% of the loan on rent if none of it is used for payroll and then I payback the 75% of the loan that would have been used for payroll?

    • AvatarCEDR Solutions says

      This question really needs the expertise of a CPA to be answered accurately and may depend on the terms of your loan agreement. Financial issues like this are outside of our normal realm of HR support.

  27. AvatarTom Sayles says

    Do you have to maintain full payroll at the end of the eight weeks in order to qualify for full fogivness?

    • AvatarCEDR Solutions says

      To qualify for forgiveness, 75% of the PPP loan must be spent on payroll during the eight week period after the loan was originated. There are also requirements to eliminate reductions in staff and pay within a specified period of time to receive loan forgiveness. This is all explained in greater detail in the blog.

  28. AvatarPenny says

    As it relates to the executive orders being put in place, am I to return to my office, or stay home until the governor “opens the state” again? My business was approved for this loan, and in good faith, since our team is back on payroll, my boss wants to put us to work. Most of what I do can be done from home, but my boss has said there are projects to do in the office and has left the decision up to me to come in or not. I don’t like having the choice and would rather just do what’s fair and legal. Some of our warehouse workers have been in to the office too, but we are not an essential business. What is the right answer?

    • AvatarCEDR Solutions says

      As an HR company we generally are able to address questions like this only from the employer’s side.

      In general, we are recommending that everyone comply with stay at home orders, this includes employers and employees. If the stay at home order in your state prevents you from legally going to work, you may want to express this to your employer.

  29. Avatarjamie says

    If my company is getting a ppp and I refuse to go back right now does that mean have to go back or I wont continue to get my unemployment.

    • AvatarCEDR Solutions says

      As an HR company we generally are able to address questions like this only from the employer’s side.

      In general, we are recommending that everyone comply with stay at home orders, this includes employers and employees. If the stay at home order in your state prevents you from legally going to work, you may want to express this to your employer.

    • AvatarDavid says

      actually the question should be can my employee demand that i come off of unemployment and pay me to stay home to force me to come off unemployment As you know most people are making more until August 1st with the 600 extra payment

  30. AvatarShawn Hettwer says

    Is the loan still eligible for forgiveness if you hire a new employee and use some of the loan towards their payroll? I was looking to bring on someone new right before all of this occurred, but it was put on hold for obvious reasons with the uncertainty of staying afloat.

    • AvatarCEDR Solutions says

      Our understanding is that 75% of the loan must be used for payroll during the eight weeks after the loan is originated in order to be forgiven and that this can include what you pay any returning employees or new hires during that period. This information is based on the text of the CARES Act, but could vary based on future guidance released by the SBA and the specific terms of your loan. We recommend you work closely with your CPA to determine how to best maximize your loan forgiveness.

  31. AvatarSean says

    Hello,

    What if my CPA created my employee wages for the quarter before we closed which had 2 additional employees not currently employed with us (they were gone before February 1) It says that you must bring in the same number of employees to fulfill the loan forgiveness part of the equation, but what if our one employee we did have before Feb 1 worked full time to make up for the two part time employees who are not here anymore.

    • AvatarCEDR Solutions says

      Our understanding on this issue is detailed in the blog and says the following:

      The amount of loan forgiveness you are eligible for depends on the average number of full-time employees you have on payroll during the 8 weeks after you receive the loan compared to the average number of full time employees you have on payroll between February 15, 2019 to June 30, 2019 OR January 1, 2020 to February 29, 2020. You get to pick the time period to which you would like to have your current employee count compared.

      Your loan forgiveness will not be affected if you reduce staff or wages between 2/15/20 and 4/26/20 if you eliminate the reduction in staff or wages by 6/30/20.

      This information is based on the text of the CARES Act, but could vary based on future guidance released by the SBA and the specific terms of your loan. We recommend you work closely with your CPA to determine how to best maximize your loan forgiveness.

  32. AvatarDavis says

    Employers receives the loan and the mayor stated offices can be open May 1st. As an employee you do not feel comfortable coming back yet because you have immediate family member that has a very compromising immune system. Your employer said he will run payroll for 80 hrs and asked how many can you can work remotely from home (example he says 10hr) weekly and states that you owe him 70 hours in the future. Is this loan given to employers to give to an employee and if an employee can’t work a full 80 hours they are required to pay back or owe their employer?

    • AvatarCEDR Solutions says

      I would definitely discuss this with your employer, as there may have been a misunderstanding. Your employer should not be paying you for hours you did not work, nor can you be expected to work for free to cover the hours paid later.

      If you feel your employer may be violating wage and hour laws, you should contact your state or federal Department of Labor.

  33. AvatarMELISSA says

    WE HAVE BEEN PAYING OUR EMPLOYEES FULL PAY SINCE WE GOT OUR PPP LOAN. OUR 8 WEEKS STARTED APRIL 16TH, I WE ACTUALLY GO BACK TO WORK BEFORE THE 8 WEEKS IS UP FOR US, WITH THE $$ SPENT ON PAYROLL STILL BE ELIGIBLE FOR FORGIVENESS SINCE THEY ARE BACK ON THE JOB WORKING?

    • AvatarCEDR Solutions says

      That’s correct, the PPP loan is designed to cover your payroll costs during the 8 weeks following the disbursement of the loan. This would definitely include payroll for employees who are working during that eight week period.

  34. Avatar says

    Hello and thank you for all of this great information. I have one question, if I hire a new employee and use PPP funds for their payroll. Will this amount be able to be forgiven?

    Thank you.

    • AvatarCEDR Solutions says

      Our understanding is that 75% of the loan must be used for payroll during the eight weeks after the loan is originated in order to be forgiven and that this can include what you pay any returning employees OR new hires during that period. This information is based on the text of the CARES Act, but could vary based on future guidance released by the SBA and the specific terms of your loan. We recommend you work closely with your CPA to determine how to best maximize your loan forgiveness.

  35. AvatarTHERESA MORGAN says

    WE HAVE 5 EMPLOYEES AND THE EMPLOYER CUT 2 FOR FURLOUGH AND 2 CUT THEIR HOURS IN HALF. HE RECEIVED 10000.00 CAN HE ONLY PAY THE 2 FOR THE 20 HOURS OR DOES HE HAVE TO PAY THEM THE FULL 40 HOURS?

    • AvatarCEDR Solutions says

      This will depend on the classification of those employees, among other things. If employees are paid hourly, all that really matters is that everyone is paid their regular rate of pay for all hours worked. With respect to PPP loans, the amount of the loan your employer uses for payroll purposes only affects how much of the loan may be forgiven — there is no requirement to use the loan proceeds in any specific amounts for any specific employees. So, your employer can choose how many hours to give employees based on what is best for the business.

  36. AvatarErin Malone says

    How do you legally handle employees that refuse work? We have some employees that have never had their hours rediced…how do we reward them for not calling in? Then we have a handful of employees that consistently call in with an excuse and are expecting to work less and get paid more.

    How can we not mess this up? We are not really reducing hours at all. We are an essential Produce supplier for resturants, grocery stores ect… I want to reward by workers that are not missing hours and I want to NOT reward those that call in with excuses (they are trying to not get over 20 hours thinking they can still file underemployment)
    Our accounting directors just want sto pay everyone the same which isnt fair if one guy works 40 hours and never calls in, and one guys trys to miss work and expects to still get paid 40 hours. Its not fair and its confusing.

    • AvatarCEDR Solutions says

      This is a very complicated question that would require quite a bit more knowledge of how your payroll is structured, how these employees are classified, and more — far too much to get into in a blog comment and more in the realm of the type of conversation you would want to have with a qualified advisor and/or attorney. Of course, if your financial directors are advising that you continue to pay employees their normal rates, then there is likely a financial reason for doing so that goes beyond any HR concerns.

      If your employees are salary-exempt, there may not be much you can do with respect to limiting pay unless you transition them over to non-exempt, which can have some complications. If they are hourly, then the amount of work they do will determine their pay and UI eligibility. Also note that if someone refuses work that is offered to them they may not qualify for UI, depending on the reason provided.

      With respect to employees calling in with “excuses,” whether or not you can address the issue will depend on the reasons given by those individual employees when they called out, as well as the various federal, state, and local employment laws that apply to your business.

      If there are certain employees who you would like to single out for their commitment and hard work, consider offering them pay raises. If you are hoping to reward hard work and commitment, consider offering performance-related bonuses to your team that would incentivize the type of performance you are hoping to see from your employees. We would not recommend tying bonuses to absenteeism or tardiness, as there are many legally protected reasons why an employee could miss work.

  37. AvatarJodi Schwab says

    Does anyone know how it works if an employee had just switched his hours to partime as of january 1st would he be required to return fulltime since they go off of last years wages when he was full time. His part time was by choice not due to the virus.

    • AvatarCEDR Solutions says

      You’ll definitely want to ask your CPA, bankers, and/or the institution providing you with the loan, though it will likely have something to do with the timeframe used in the calculations you made to determine the size of the loan your business needed. Item #2 under the heading “Can the loan be forgiven?” above explains that “The amount of loan forgiveness you are eligible for depends on the average number of full-time employees you have on payroll during the 8 weeks after you receive the loan compared to the average number of full time employees you have on payroll between February 15, 2019 to June 30, 2019 OR January 1, 2020 to February 29, 2020. You get to pick the time period to which you would like to have your current employee count compared.” If you went by last year’s data, you may be obligated to have your staffing equivalent to when that employee was full time. If you went by this year’s numbers, bringing them on part time should be fine. Also, keep in mind that any reduction in staff or wages between 2/15/2020 and 4/26/2020 will not affect loan forgiveness so long as you eliminate that reduction by 6/30/2020. So, if need be, you may be able to bump another employee’s hours up to full time or hire someone else to help make up this difference. Again, this is our understanding of the law, but you will need to double check with your CPA for specific, actionable guidance for your business. Hope this helps!

  38. AvatarAmber says

    If employees are not in the office working, do they still get paid their regular wages during this 8 week period or not?

    • AvatarCEDR Solutions says

      This is a bit of a broad topic to cover with a simple “yes” or “no,” but the short answer is that employees should be paid for any work that they do, no matter where they are when they do it. If your employees are classified as “exempt” and are paid on a salary basis, then in most cases you will need to pay them their entire weekly salary if they perform any work for your business during that week, at home or in the office. For hourly, “non-exempt” employees, you will need to have them log their time so you can pay them for any time they spend on the clock, even if they are working from home.

      If you are asking whether you can pay employees who are not working their regular salaries during the 8 weeks after loan disbursement in order to maximize your forgiveness, we would recommend that you work closely with a CPA to develop a strategy that works best for your business and is in compliance with the terms of your loan. We have definitely heard of employers deciding to do this in situations where they have the loan and are still unable to reopen their business at all or at full capacity, but that doesn’t mean that it is best for you.