CARES Act – What Just Happened? Week of April 27, 2020

Rachel Fierberg, CFO Consultant, Kranz

CARES Act – What Just Happened?

Week of April 27, 2020

Kranz receives frequent updates on the CARES Act and how businesses are responding to impacts of the COVID-19 through communications with our consultants, valued clients, partner banks, and legal and tax service providers. In our commitment to keeping you informed, we will be sharing this information on a regular basis. Check our blog for current updates. Please contact us if you’re interested in a complimentary one hour CFO consultation on any of these issues.


PPP Loan Forgiveness: Insights and Best Practices

On April 30th, Kranz’s, Rachel Fierberg, hosted Koffee with Kranz with special guests Gabriel Torre, Squar Milner, and Rob Lopez, Justworks. The group discussed and shared perspective on:

  • Insight on monitoring qualified expenditures
  • Details on accounting best practices as they relate to loan and associated forgiveness
  • Documentation and submission to the SBA lender

If you would like a copy of the deck or to view the recording, please click here to access.


PPP Loan FAQs

On Wednesday, April 29 the Small Business Administration released Payroll Protection Program Loans FAQs, a revision to the PPP FAQ’s they had previously released April 26. This Q&A is shown below along with other broadly applicable Q&As from the document. You can also access the SBA FAQ page directly here.


Recently Asked Questions

 

  • Q. How long do I have to spend the money?
    A. Eight weeks. The clock starts when the loan is funded. These eight weeks are referred to as the “covered period”.
  • Q. Can I delay receipt of the money so that the clock will start later?
    A. No. The intent of the program is to help businesses make payroll now, not later. Under the CARES Act lenders are required to fund all or part of the loan within ten days of its approval.

 

  • Q. Do I need a separate bank account to track PPP proceeds and their use?
    A. There is no requirement to have a separate bank account however it is recommended as a best practice.
  • Q. What if I have already laid off my employees?
    A. The intent of the program is for you to be able to keep paying all employees their regular pay whether they are working or not. Consult with your employment law attorney as you consider the terms for rehiring any employees to restore your FTE count.

 

  • Q. For determining the loan forgiveness amount how is the $100,000 wage limit applied in the 8-week period?
    A. For a company that pays weekly, wages paid to an individual in an amount over $1,923 ($100,000/52) would be excluded. For a company that pays bi-weekly, wages over $3,846 ($100,000/26) to any one person in one pay period would be excluded. If you are on anything other than a weekly pay period consider switching to weekly so that you maximize the payroll costs incurred within the 8-week covered period.

 

  • Q. What is rent, and does related party rent count?
    A. CARES Act does not specify whether rent is for real or personal property so it would be acceptable to include both. However, you can only include rent paid under a leasing agreement in force (signed) before February 15, 2020. Capital leases are excluded because they are a financing agreement and not a leasing agreement.

 

  • Q. What utilities are included?
    A. Payment for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020. A “transportation utility” has been interpreted to mean fuel costs for business vehicles.

 

  • Q. What interest expense is included?
    A. Interest on loans secured by real or personal property that were in effect before February 15, 2020. If your line of credit is secured by real or personal property, then the interest paid on the line would be included.

 

  • Q. Can I avoid forgiveness reduction?
    A. Yes, if you eliminate the reduction in FTEs and eliminate the reduction in wages by June 30, 2020.
  • Q. For loan forgiveness, if you don’t satisfy 75% rule for the payroll, rent and utilities cost will not be forgiven as well? In other words, is spending 75% of the loan on payroll the prerequisite for loan forgiveness? 

A. CARES Act directs the SBA to provide clarification of the process around calculating the forgiveness amount 30 days after the act was passed. That would mean by April 26. But those instructions have yet to be provided. With that said the current presumption is that any failure of the applicant to spend at least 75% of loan funds on payroll, or to retain staff levels, (the two measurement benchmarks specified in the Act) will just reduce the amount of the loan forgiven. Not hitting either benchmark does not mean that the forgiveness opportunity is fully lost.

 

  • Q. What documentation will I have to provide to support my forgiveness calculation?
    A. Calculations for FTEs, payroll tax filings (Form 941 and payroll registers), verification of payment (canceled checks, bank statements), account statements, bills, etc. We recommend keeping a spreadsheet of all eligible expenses as they are incurred and filing copies of the supporting documentation in a special folder. A copy of the bank statement with eligible expenditures highlighted would also be helpful to support any EFT payments. The SBA is clear on this point: no documentation = no forgiveness.
  • Q. If you don’t care about the loan being forgiven, can you use the fund for any purpose? For example, can you park it in a money market account until when you need it later?

A. As part of the PPP loan application process the applicant is required to certify that current economic uncertainties make the loan necessary to continue operations, and also that the funds will be used in accordance with terms of the CARES Act. One of these terms is that loan funds are used during the eight week “covered period” and, secondly that they are used for payroll, rent, lease and utilities. Failure to abide by these certifications would likely lead to financial and perhaps criminal penalties.

 

  • Q. Can I pay an employee on payroll even though the employee is unable to work because of shelter-in-place restrictions and will those payments be eligible for forgiveness?

A. Yes, however the employer will be incurring federal payroll taxes during this period which cannot be included as part of the forgiveness amount calculation.

 

  • Q. What is the deadline for submitting a PPP loan application and subsequent request for loan forgiveness?

A. Applications must be submitted no later than June 30, 2020. Although subject to change in forthcoming SBA guidance the current due date for submitting forgiveness requests is December 15, 2020.

 

  • Q. What if I pay my utilities with my business credit card?
    A. Keep track of what you have charged to the credit card that is an eligible covered cost and make sure you apply a cash payment from the proceeds to the credit card bill before the end of the 8-week period.

 

  • Q. Do I account for my covered costs during the 8-week period on a cash or accrual basis?
    A. There is no guidance yet on whether the covered costs are to be included on a cash or accrual basis. The cash basis will be easier to support on your forgiveness application.

 

  • Q. What if my payroll costs during the 8-week period use up 100% of my loan proceeds? Is this ok or do I have to spend some of the money on rent, utilities, and interest?
    A. It is acceptable to spend 100% of the proceeds on payroll costs. The only SBA restriction is that at least 75% of the proceeds have to be spent on payroll costs.

 

  • Q. What if I do not spend 100% of the loan proceeds on covered costs?
    A. Guidance from the SBA on this is expected. The expectation is that you’ll have two options: (a) repay the excess immediately and reduce the loan amount or (b) keep the excess and repay it within the two-year loan period.

 

  • Q. What happens if I don’t follow the rules for use of proceeds?
    A. The SBA can charge you with fraud in addition to making you repay the misused amounts.

 

  • Q. Is the forgiven amount considered taxable income?
    A. No.

 

  • Q. How do I apply for forgiveness?
    A. Lenders are responsible for processing of loan forgiveness requests and will provide details on this is handled. We recommend you stay in close touch with them but remember that you have until the middle of December to submit your loan forgiveness request.

 

  • Q. When will I know if my forgiveness application has been approved?
    A. The lender has 60 days to review and either approve or deny the application.

 

  • Q. What are the terms of the loan (the portion that is not forgiven)?
    A. 1% and the term is two years. No collateral, no personal guarantee required, and no prepayment penalties.
  • Q. How does the loan amount not forgiven get repaid?
    A. Principal and interest payments on the PPP loan are automatically deferred for six months but the lender is authorized to extend the deferral for up to a year. During the deferral period interest accrues during this deferral period.

Additional Resources

National Venture Capital Associations (www.nvca.org)

U.S. Treasury (www.treasury.gov)

Small Business Administration: www.sba.gov

Live Update from Pitchbook on COVID-19 Impacts to PE/VC

Embracing the New Norm — Establishing and Optimizing the Effectiveness of Virtual Finance & Accounting Teams

As the COVID-19 pandemic continues its vice-like grip on, well, everything, businesses continue to cope as best they can.

Particularly hard hit during the insanity are finance and accounting teams. Long accustomed to working in highly-structured environments, many teams are struggling to adapt to a suddenly-remote job.

Recently, FloQast Co-founder and CEO Mike Whitmire and Kranz Associates CFO Andrea Tiller hosted a webinar with veteran accounting leaders to discuss remote work struggles, best practices for managing teams in a highly stressful time, and how they’re adapting on the fly.

Click here to read the rest of the Blog on the FloQast site for more on:

The Art of Communication: Clear Dialogue Dictates Success

Collaboration is Key: How Teams Can Organize Processes and Responsibilities

Embracing the New Norm: How to Maintain Company Culture Remotely

 

 

Virtual Event: 4.30.20 Koffee with Kranz – PPP Loan Forgiveness: Insights and Best Practices

You were approved for Paycheck Protection Program (PPP) funds, now what? How can you position yourself to maximize loan forgiveness?

Please join Rachel Fierberg for a cup of joe with a Kranz CFO and her guests Gabriel Torre, Squar Milner, and Rob Lopez, Justworks for Koffee with Kranz to help you understand the loan forgiveness portion of your SBA loan.  The discussion will include:

  • Insight on monitoring qualified expenditures
  • Details on accounting best practices as they relate to loan and associated forgiveness
  • Documentation and submission to the SBA lender

Date: Thursday, April 30, 2020

Time: 10 AM PST – 11 AM PST

Register Here

Speakers:

Rachel Fierberg, Consulting CFO, Kranz

Gabriel Torre, Tax Partner, Squar Milner

Rob Lopez, SVP, Justworks

Register Here

This is a strange, tumultuous time for all of us. Many are working from home and feeling isolated. Knowing that uncertainty is the only constant can be unsettling. We sense the need for our clients and colleagues to connect. As such, we would like to employ the collective experience of Kranz team to facilitate conversations that will connect our members and enable them to succeed in this difficult environment. Above all, we want to let our clients know WE ARE HERE FOR YOU!

Weekly Update April 24, 2020

At Kranz, we are staying on top of the latest news as it relates to business and the COVID-19 response. We are also hosting and participating in several webinars to bring you the latest information and help navigate these challenging times.

Complimentary CFO Session

Please contact us directly here if you’re interested in a complimentary one hour CFO consultation on any of the finance and accounting issues impacting you as a result of COVID-19. We can help guide you through the programs being offered under the CARES Act.

Blog 

CARES Act Update Week of April 20, 2020 – Senate Approves Additional Funding

Check out the latest PPP Loan Update, SBA EIDL Update, Transition Back to Work, PE/VC Backed Firms – Main Street Loan Program, Deferral of Taxes, R&D Tax Credit, and Recently Asked Questions.

Read more

Upcoming Events
💻Controlling Spend During Covid-19 & The Recession
April 29, 2020 | 6:00 AM – 7:00 AM PST  Register here
Hear from leading CFOs on how to manage spending responsibly, keep business continuity, and grow during periods of economic crisis.

Speakers:

Andrea Tiller, Consulting CFO, Kranz

Julian Hannabuss, Director of Revenue Operations, Procurify

Debbie Rosler, On-Demand CFO Consultant, Burkland Associates

 

💻Koffee with Kranz: PPP Loan Forgiveness: Insights and Best Practices.
You were accepted for the Paycheck Protection Program (PPP) funds, now what? How can you position yourself to maximize loan forgiveness?

April 30, 2020 | 10:00 AM – 11:00 AM PST  Register here
Please join us on this webinar to understand how to follow the loan forgiveness portion of the SBA loan:

 

  • Insight on monitoring qualified expenditures
  • Best accounting practices as they relate to loan and and associated forgiveness
  • Documentation submission to the SBA lender

Speakers:

Rachel Fierberg, Consulting CFO, Kranz

Gabriel Torre, Tax Partner, Squar Milner

 

💻Tools for the Times: Remote Tools for Finance and Operations Teams
May 6, 2020 | 10:00 AM – 11:00 AM PST  Register here
During this uncertain time, many companies have gone remote. Not all finance and operations teams are equipped with the right tools to help their teams stay connected, productive and engaged. Kranz CFO, Nancy Bush, will be a speaker for the interactive event, Tools for the Times, on May 6th. Hear from leaders of the 10 top fintech tools for finance and operations teams.

Speakers representing:

Kranz (Nancy Bush), Avalara, Rippling, NETSTOCK, YayPay, FloQast, Bill.com, Procurify, Jirav, Carta, and Sensibill

 

We hope you can attend! Please don’t hesitate to reach out. We are here to help.

 

Stay healthy!

 

 

CARES Act Update Week of April 20, 2020 – Senate Approves Additional Funding

Rachel Fierberg, CFO Consultant, Kranz

The Senate approved $310B of additional funding for PPP loans Tuesday afternoon. With approval in the House expected Wednesday banks should be in a position on Thursday to finalize processing of applications received but not yet approved and to accept new loan applications. $310B consists of the initial plan for an additional $250B of PPP loan funding along with $60B for rural businesses who likely did not have arrangements in place with SBA approved lenders when the CARES Act was passed March 27.

CARES Act – What Just Happened?

Week of April 20, 2020

Kranz receives frequent updates on the CARES Act and how businesses are responding to impacts of the COVID-19 through communications with our consultants, valued clients, partner banks, and legal and tax service providers. In our commitment to keeping you informed, we will be sharing this information on a regular basis. Check our blog here for current updates. Please contact us if you’re interested in a complimentary one hour CFO consultation on any of these issues.

Continue reading “CARES Act Update Week of April 20, 2020 – Senate Approves Additional Funding”

Virtual Event: 5.6.20 Tools for the Times

Tools for the Times

 

During this uncertain time, many companies have gone remote. Not all finance and operations teams are equipped with the right tools to help their teams stay connected, productive and engaged. 

We’re proud to be a sponsor and Kranz CFO, Nancy Bush, will be a speaker for the interactive event, Tools for the Times, on May 6th. Hear from leaders of the 10 top fintech tools for finance and operations teams. 

When: May 6, 2020

Time: 10 am PST / 1 pm EST

Online Event Register Here

The featured tools include:

  • Rippling
  • Netstock
  • FloQast
  • YayPay
  • Bill.com
  • Jirav
  • Carta
  • Avalara 
  • Sensibill 
  • Procurify

Register Here

Virtual Event 4.23.20: Cash is King: Contingency Plans in a Downward Economy

Join us for a live virtual event on Thursday, April 23, from 10 AM – 11 AM PST, as executives from Kranz, Brex, and TriNet discuss challenges in the current market and key strategies for long-term success in cash management, HR, and customer acquisition.

In a world where uncertainty is the only constant and strategy is vital to creating stability, we are here to help you feel more in control.

When
April 23, 2020

10 AM – 11 AM

Where
GoTo Meeting

Register Now

Cash is King: Contingency Plans in a Downward Economy
TOPICS WE WILL COVER:
  • Cash Management
  • HR Response to Shifts
  • CAC (Customer Acquisition Cost) Improvement

Walk away with actionable insights to help your growing company mitigate risk and navigate this evolving situation with resilience.

Moderated by: Ari Palmer, Founder, TaxTaker

Air Palmer

 

Register Now

CARES Act Update Week of April 13, 2020

Nancy Bush, CFO Consultant, Kranz

Kranz receives frequent updates on the CARES Act and how businesses are responding to impacts of the COVID-19 through communications with our consultants, valued clients, partner banks, and legal and tax service providers. In our commitment to keeping you informed, we will be sharing this information on a regular basis. Check our blog here for current updates. Please contact us if you’re interested in a complimentary one hour CFO consultation on any of these issues.

CARES Act – What Just Happened?

Week of April 13, 2020

PPP Loan Update

Loans Approved and Funding Update

Through April 11th, over 3,200 SBA qualified lenders had approved 725,000 PPP loans totaling $182B against an amount of $349B (frequently referred to as $350B) approved through the CARES Act. Disagreement occurred in the Senate last week on a request to increase PPP loan funding by $251B. There will be a second attempt to approve the increase and sent it to the House for full approval this week.


PPP Loan Recommendations

PPP loan requests need to be submitted prior to June 30, 2020 but we recommend doing so as early as possible. We also highly recommend a discussion with your board of directors and legal counsel around the objectives and benefits of applying for a PPP loan.

In that regard, having a good corporate process around your decision-making process is key:

  • Counsel or corporate secretary should be documenting the entire process with minutes
  • Develop documentation of the necessity for the loan as well as what makes you eligible
  • Develop basic financial information for supporting your eligibility
  • Begin implementing structure and process around your record-keeping to be used for requesting loan forgiveness.

PE/VC Backed Firms Eligibility

A key outstanding issue pertaining to the applicability of affiliation rules to PE/VC backed firms as it pertains to their eligibility for PPP loans has yet to be resolved. This article from April 10 provides good information on this topic. Clarification of Affiliation Issues.


Loan Forgiveness

A reminder regarding loan forgiveness. The CARES Act’s intent is that PPP loan funds are to be used for the purposes of retaining employees and covering a portion of non-labor costs for a 60 day period at which point the expectation is that the coronavirus issue will largely be behind us and businesses will be open. Loan forgiveness needs to be applied for and can be done through mid-December 2020. Only the loan funds spent over 60 days starting at the point when the loan was funded are eligible for inclusion in the loan forgiveness request. This means that recipients of PPP loans will maximize their loan forgiveness opportunity if all loan funds are spent during those 60 days.

A further stipulation is that no more than 25% of the funds spent during that period can be for utilities, lease expense obligations incurred before February 15, 2020, and mortgage interest expense obligations incurred before February 15, 2020. To the extent that more than 25% of the loan funds are used to cover non-payroll costs, the amount of the loan forgiven will be reduced.

Finally, in loan forgiveness amount calculation instructions to be released by the Treasury in the coming weeks, we expect to see details of how loan funds spent for payroll-related costs will be compared to the payroll costs used to determine the PPP loan amount. Expect to see reductions to the approved loan forgiveness amount if there are significant reductions between the two, or reductions in the number of individuals employed when the loan was applied for and now.


CARES Act Additional Cost Savings

Aside from the PPP loan option the CARES Act provides additional cost-saving opportunities for small businesses. One in particular Deferral of Employment Taxes is explained in this IRS document.


Recently Received Questions

What if our application has been submitted before having a board discussion?

If the COVID impact is not obvious (e.g. Company has 12-18 months of runway) your board should have that conversation now (it is not too late). From a process perspective it will take at least 10 days from application approval to funding.

If funds already hit the account and certification is inaccurate (i.e. company was actually ineligible), what should we do?

Unwind the transaction and return the funds immediately. If it’s not as clear of a situation, encourage your board to discuss whether or not to return the funding. Immediate correction would not warrant SBA enforcement.

SBA/Congress has not defined what is considered a corporate “necessity” to take the PPP loan as it does for an EIDL loan. Can you clarify?

An EIDL (Economic Injury Disaster Loan) process and eligibility requirements are stricter than they are for a PPP loan. As an example, your company will need to shut down without the loan. SBA has not included this qualification requirement for PPP loans that are intended to prevent you from having to reduce the number of your employees. If you can clearly document how your business has been meaningfully impacted, your case should be compelling to substantiate the need for a PPP loan.

What are the penalties for misrepresenting in the application?

There is a very big difference between getting it wrong versus intentional misrepresentation. Getting it wrong – If you documented and can prove that you arrived at the decision in good faith, the likely penalty would be loss of forgiveness/repayment of loan. Intent to misrepresent or reckless disregard for rules (e.g. affiliation rules) – If you did not go through a deliberate process for determining your eligibility and applying for the loan, if you say things in your board deck such as “we don’t need money but it would be nice to have” civil and criminal penalties may apply.

Is it difficult to modify documents (e.g. removing negative covenants) and are there legal and reputational risks for doing so?

It doesn’t appear that it will be difficult to modify documents concerning negative covenants. There could be negative press but legally you are in the clear. A temporary waiver is likely legally clear but would be bad optics and not recommended.

How does a fundraising timeline factor into a demonstration of necessity?

If your company is currently going through a fundraising round but will be out of cash in 60-90 days, you should be okay. A pre-determined cash need is a very clear demonstration of necessity. However, your request for a loan would be hard to justify if your company just received funding or will receive funding right after receiving the loan

Would you recommend segregating the funds from the loan?

It will make it much easier to track the use of proceeds for forgiveness.


Recommended websites for additional information and guidance:

For You – The Treasury department will be launching a web-based application at www.IRS.gov this week enabling individuals to expedite receipt of individual stimulus payments. While all payment recipients can expedite receipt of their payments through this site, it is in particular designed to enable those who have not filed tax returns in prior years to enter information enabling a direct deposit of their payment to their bank account. Check Get My Payment for more information.

National Venture Capital Association (nvca.org)

U.S. Department of the Treasury (www.treasury.gov)

SBA: sba.gov

CARES Act Update Week of April 6, 2020

Nancy Bush, CFO Consultant, Kranz

 

Kranz receives frequent updates on the CARES Act and how businesses are responding to impacts of the COVID-19 through communications with our consultants, valued clients, partner banks, and legal and tax service providers. In our commitment to keeping you informed, we will be sharing this information on a regular basis. Check our blog here for current updates. Please contact us if you’re interested in a complimentary one hour CFO consultation on any of these issues.

CARES Act – What Just Happened?

Week of April 6, 2020

The CARES Act intended that SBA approved lenders begin providing Payroll Protection Program (PPP) loans as of April 3. Bank of America and JP Morgan Chase met this objective and other lenders began providing loans earlier this week. For the most part, lenders appear to be accepting applications only from their own current banking clients. Non-bank clients will be considered for loans once their client applications begin to diminish. As this is being written April 8, 3,200 banks have provided $70B of loans to over 250,000 businesses. Legislation requesting an increase in funding for PPP loans by $250B is expected to be approved by the House and Senate within the next week.

 

Interim final rule PPP Interim Final Rule released on April 3 by the Treasury in which several enhancements and clarifications were made to the application process as follows:

  • Payments to independent contractors are not considered payroll costs for the purpose of computing the average monthly payroll cost used to determine the maximum loan amount. Only compensation to employees should be taken into account. (Independent contractors are entitled under the Act to submit their own PPP loan application.)
  • 100% of the loan proceeds used in the eight-week period following the date of the loan are eligible for forgiveness however any amount of non-payroll costs (i.e. interest on mortgage obligations, rent/lease payments, utility payments) exceeding 25% of costs during the eight weeks will not be forgiven.
  • The amount of loan forgiveness can be up to the full principal amount of the loan and any accrued interest.
  • The interest rate on the unforgiven portion (if any) will be 1%, with a maturity date of two years. This compares to it being a maximum of 4% and maximum maturity of 10 years in the original text of the bill.
  • The interim final rule mentions that the SBA intends to promptly issue additional guidance with regards to the applicability of affiliation rules. (A Wall Street Journal article April 4 references a representative from the VC/PE industry as saying there are 15,000 VC backed and 12,000 PE backed small business in the U.S., and that the affiliation waiver for these firms could be in place before April 11th.)
  • Electronic signatures and consents are allowed.

 

New PPP application form released by the Treasury on April 3rd: PPP Application Form (04032020) Changes between this version and the initial one include the following:

  • The specification of the applicant’s business status is expanded to include sole proprietor, independent contractor, partnership, C-Corp, and LLC.
  • Calculation of the loan amount now includes the addition of any EIDL loan less any advances made ($10,000). This is further clarified in the instructions by indicating that only EIDL loans made between January 31, 2020 and April 3, 2020 are to be included.
  • The request for number of jobs has been changed to number of employees.
  • The term “owner” has been changed to “applicant” throughout.
  • The question on whether the applicant is a U.S. citizen or lawful permanent resident has been removed.
  • A question has been added asking if the principal place of residence is the U.S. for all of the applicant’s employees included in the payroll calculation.
  • A question has been added asking if the applicant is a franchise listed in the SBA Franchise Directory.
  • Added is a certification by the applicant that they are eligible to receive a loan as eligibility is defined in the CARES Act.
  • Added is a certification by the applicant that they are an independent contractor, eligible self-employed individual or sole proprietor, or employs fewer than 500 people.
  • Added is a certification by the applicant that he/she was in operation on February 15, 2020 and had employees for whom they paid salaries and payroll taxes, or paid independent 1099 contractors.
  • A very detailed description is newly provided in the instructions (page 3 of the application instructions) with respect to what payroll related expenses can paid for from the loan.

 

Currently, Kranz is assisting many of our clients with strategic thinking about the various benefits contained in the CARES Act and analysis of their loan options. Banks are most likely to have their own online loan application forms mirroring the one issued by the Treasury April 3. PPP Loans will be accepted through June 30, 2020.

 

We recommend that Founders have a conversation with all board members to ensure agreement on filing of a PPP loan application. There has been some discussion around whether companies in industries other than retail, food service, and hospitality should be applying for these loans. In particular, companies with a strong balance sheet (due to a recent financing.) Recall that this loan will effectively be discoverable via a FOIA (Freedon of Information Act) request. The board should be considering media and public relations repercussions. Also, begin crafting a narrative around the “economic necessity” for this loan as it will become helpful at least to the loan forgiveness request after 60 days (eight weeks.)

 

Recently Received Questions

If you have an employee with a compensation of $200K and they join halfway through the year, should you include them?

Yes, based on the application form and SBA guidance, an annualized compensation for all employees should be included for payroll cost calculations. However, the maximum annual compensation you can use for any one employee is $100K.

Guidance on the payroll calculation was to use a salary cap of $100K versus the cost of $100K noted in the application. Which one should I use?

While this is still not 100% clear based on the various guidance and rules that have come out, the latest interim final rule from the Treasury suggests that the $100K cap applies to salaries/commissions only and does not cap benefits.

Under the Paycheck Protection Program there appears to be a $100k payroll cost limit. Is that intended to be a $100K cap per employee/contractor, or limit eligibility to only those employees/contractors under $100K in salary?

This is a $100K limit for each and every employee included in the calculation of average monthly payroll cost. Remember that independent contractors are not to be included in your calculation of average monthly payroll cost because they were given the opportunity to apply separately for a PPP.

Does the $100K cap per employee for PPP include all forms of compensation to the employee (wages, taxes, healthcare benefits etc.)?

The interim final rule from the Treasury suggests that the $100K cap applies to salaries/commissions only and does not cap benefits.

Does payroll costs for PPP include employer share of social security and Medicare?

Social security and Medicare comprise FICA taxes, which are excluded from payroll costs.

 

Recommended websites for additional information and guidance:

National Venture Capital Association (nvca.org)

U.S. Department of the Treasury (www.treasury.gov)

SBA: sba.gov

Virtual Event 4.15.20: Transforming HR for Economic Stability and COVID-19 Best Practices

Please join us for a live Lunch & Learn conversation with our friends at TriNet to discuss best practices as it pertains to COVID19 from an HR perspective. It is Kranz’ goal to provide our clients with guidance on how to protect your business and employees through market uncertainty. Alicia Hotson and Allie Rogers, consultants at TriNet, will address the top of mind questions for small to mid-sized business, discuss implications for both start-ups and financial services firms, and provide expert resources available to you in real-time.

When
April 15, 2020

11:30 AM – 12:30 PM

Where
Zoom Webinar

Register Now