PPP Loan Update – June 1, 2020

We hope you are all well and getting back up and running in a safe manner.

As you know, there is more to this pandemic than the Paycheck Protection Program (“PPP”).  Things have been and continue to change rapidly.  If you are not ahead of the curve, you are behind.  Keep vigilant.

In late March and April, many businesses lived off existing receivables and made tough changes to their businesses.  As the calendar turned to May, PPP money was a temporary life preserver.  Now, as we stare at June, some are looking at PPP loan money being exhausted and opening for business or continuing their businesses amid a lot of uncertainty.  In a lot of respects, for many, it is like starting your business all over again – only with a bigger (albeit uncertain) customer base, more established relationships, new rules that are constantly changing, and bigger overhead.  Just like in Rocky III, we all need to get back to our roots and find the “Eye of the Tiger.”  We have built a business before; now we must do it again with a head start and within a different set of rules.

The primary principles and planning points we discussed early on still hold true: (1) Monitor your cash flow as closely as possible, as it is your life blood; (2) Look for opportunities and jump on them quickly; (3) Keep in close contact with your customers, vendors and team/staff, as communication is key; and (4) Fortify your IT and security measures.  We will expand on these in a series of emails over the coming weeks.

For now, the focus is cash flow.  With that, let us start with the PPP and then discuss other measures.

Below is a link to an Excel workbook that will help you calculate loan forgiveness.  We have also linked a short instructional video to show you how to use it.  As the calculations are involved and we are accountants and not programmers, there are some limitations to the workbook (please see “Instructions” tab); however, it should give you a good picture of where you stand regarding PPP loan forgiveness.

As some of you may have seen, the House passed the Paycheck Protection Flexibility Act of 2020 last Thursday.  This is a separate bill that relaxes some of the PPP loan and forgiveness requirements as follows:

  • Extending the expense forgiveness period from eight weeks to twenty-four weeks
  • Reducing the 75 percent payroll ratio requirement
  • Eliminating 2-year loan repayment restrictions
  • Allowing payroll tax deferment for PPP recipients
  • Loosening the FTE reduction loan forgiveness provisions
  • Extending the June 30 rehiring deadline

As SBA and Treasury guidance has been issued, it has generally been borrower-friendly, and this is no different.  There is a similar bill in the Senate, and we are hoping to see this passed, reconciled, and signed into law shortly.  Again, this is NOT law yet, but are hoping that it will be as soon as this week.  For the moment, our advice is to continue to plan for the worst (the current PPP forgiveness rules) and hope for the best (Paycheck Protection Flexibility Act of 2020).

If these rules change, we will update our workbook and send it out when available.  At that point, for most of us, it should be more a matter of doing everything you need to do to ensure that the full PPP loan will be forgiven and less of a question of how much of the PPP loan will be forgiven.

With regard to cash flow, there are other Federal and New York State loan programs available which are not forgivable but have favorable terms.  They are listed here.

In addition to the programs above, continue to monitor your cash flow and adjust your revenue, expense, and cash flow budgets frequently.  With regard to receivables, a few ideas are to accelerate them where possible, review payment terms, give incentives for early payment where practicable, and ask for deposits up front.  With regard to payables, review your contracts and expenses, defer payments where possible, and prioritize suppliers and vendors that are critical to maintaining status quo and top line growth.  Keep in close contact with your bank and lending sources as they are an integral part of this process.

There is no one-size-fits-all answer to the many questions we have.  These paragraphs are meant to give you some ideas but are not a cure-all.  You should continue to work with your professional team to work through these issues.

The goal right now is to get through this critical period with as little debt as possible to get to a time when we can all make money again. Please let us know if we can help.

To download our updated workbook, click here.

View the video below for an in-depth tutorial on how to use our workbook.