May 18, 2020
NJGCA May 18th
Coronavirus Shutdown Update
Friday night the Small Business Administration (SBA) finally released their official PPP Loan Forgiveness Application. We are still going through it to determine what kinds of outstanding questions remain. At this moment there are no additional instructions about the document available, so we thought it’s best to get a copy in front of you as soon as possible.
Even though no one has yet completed the 8 week (56 days) window for their PPP loan, I think it’s advisable to take some time and sit down and go through the application based on your spending so far and what you project your spending to be through the end of the covered period in order to make sure you are in compliance with the specific rules on how to spend the money. There may be some ways to maximize the amount of covered spending, such as making sure you pay some of your bills a little bit earlier than they are due, since non-payroll costs can be covered even if the next regular billing date falls just outside the covered period, as long as the payment is made within the covered period. The application does maintain the rule that Treasury came up with that caps all non-payroll expenses at 25% of the total amount of loan forgiveness. There is a penalty for having fewer employees and/or lower salaries, but there are ways to reduce or eliminate that penalty if certain actions are taken. Making sure you at least consider those actions is probably the main reason to go through this application now.
Please note that the covered period begins on the date you received the money, and ends 56 days later, in order to be forgiven the money must be spent within that time frame. They did make one concession and allow for an alternative period to be used for the purposes of payroll expenses only, which begins the first day of the first payroll payment made after the money was received, and lasts 56 days after that.
You do not need to submit this application on the exact day your funding runs out. The application will be submitted to your lender, not to SBA, and the lender is legally obligated to decide on the application within 60 days of receiving it. SBA also explicitly stated that your eligibility for forgiveness will be based on the rules and guidance in place on the date you submit your forgiveness application, which makes pretty clear that they anticipate making changes in the coming weeks and months. This is another reason to stay on top of your application, if you’re in a position at the end of your covered period to get full forgiveness, make sure to submit the application before the rules get changed in a way less favorable to you!
We are planning to put together a webinar on PPP spending and forgiveness in the near future, and the release of this information means we have some clear guidance and should be able to give some more concrete information. If you have any questions while going through the application, please feel free to email Nick@njgca.org AND Eric@njgca.org
Some other good news on Friday was an announcement by the Governor that the NJ Economic Development Authority (EDA) is being given $50 million of federal funding to provide more support to businesses. The first launch of the EDA grant program gave out grants of up to $5,000 to small businesses, but the original $5 million funding ran out within the first hour of availability. Some of the money will be going to businesses still on that waitlist, and the head of the EDA said he expected to also reopen applications for that or a similar program to those who did not apply back in April. However, given that the $5 million ran out within an hour, $50 million is still just a drop in the bucket compared with the need out there, and hopefully the governor and Legislature will soon be dedicating more money from the federal government’s bailout package to support for struggling businesses.