PPP Loan Forgiveness. Where to be Proactive and When to be Responsive?
Every Small business owner out there is occupied with only one action Item right now: The Paycheck Protection Program. There is lots of commotion, many unanswered questions and some major challenges associated with it, starting with securing the funds for their business. However, when the dust settles, meaning when majority of the small businesses get funded which I believe will happen, the focus immediately shifts to Loan Forgiveness, which is one of the most attractive features of this program.
This loan is put into the hands of small businesses for primarily paying employee wages and other critical expenses for a period of 8 weeks from the day you secure the funds. SBA says, it will forgive the entire loan if all employees are retained / rehired on the payroll and at least 75% of the loan proceeds are used for payroll. Other 25% can be used to cover Rent, Heath Care, Mortgage interest, Utilities...etc.
Interestingly, SBA is not the one that gets involved when it comes to forgiveness. It is your lender that comes up with the document criteria when it comes to forgiveness. There can be random audits conducted by the SBA after the forgiveness happens, but for now, lenders will handle the forgiveness process.
Seems simple right? What can be complicated in this? Here’s how I see it,
When there are no set guidelines in any program, it naturally leads to assumptions and speculations. What are such speculations and assumptions when it comes to PPP Loan forgiveness?
One of the speculations say, “No forgiveness for businesses whose 2020 taxable income exceeds that of 2019. Full forgiveness would be available only to those businesses whose 2020 gross receipts are less than 60% of the preceding year’s”.
One of the assumptions say, “I-9 could be required as one of the supporting documents for loan forgiveness to establish the recipients of payroll were authorized to work in the US”.
Now, how should I react to these speculations and assumptions? If I were you, I will take every speculation and assumption in to consideration and be prepared accordingly. You might say “I would like to take it as it comes”. Well, that attitude does not fly all the time.
Here’s a relevant scenario: “COVID-19 affects different people in different ways. Most infected people will develop mild to moderate or No symptoms at all. But it has been proven to be fatal in quite a few cases”. In this case, Government and common sense expects everyone to assume that it is fatal to us and not test the waters. Therefore, the Shelter in Place. Therefore, at an individual level, it is recommended to use the gloves, masks, wash hands, not do things that compromises your immunity. These are precautions and unfortunately considered optional by some.
Similarly, Loan Forgiveness affects different businesses in different ways, but it is almost certain that SBA will audit quite a few of them. Therefore, it is recommended to be prepared where it is required and not do anything that can compromise Compliance at your organization.
In conclusion, this is how I expect you to look at it -
If my company has grown from last year, it is a good thing. If that is the reason not to forgive the loan, so be it. I will any day take growth than forgiveness. In this case, I will use the take it as it comes attitude if the above-mentioned speculation turns out to be true.
However, I cannot use the same attitude if the above mentioned “assumption” comes true. Not being compliant with I-9s can attract lot of penalties, let aside the forgiveness. It is recommended to be proactive and address the non-compliance by conducting an Internal I-9 Audit.
Don’t let I-9 be the constraint for your loan forgiveness. More Importantly, I-9 compliance should be a part of your policy irrespective of the loan forgiveness.
Learn how you can avoid these large penalties for non-compliance by registering to this free webinar from our product experts. Everything you need to know, from I-9 internal audits to PPP Loan forgiveness.
Topic - Being prepared for PPP Loan Forgiveness and Conducting Internal Form I-9 Audits.
?? April 27, 2020 | 2:00 PM – 3:00 PM ??
This 1-hour learning session is designed to enable HR & Employers understand the End -to End I-9 Compliance.
Topics of coverage:
1. Is Form 1-9 a required document for PPP loan forgiveness?
2. Social Distancing and Form I-9s
3. ICE - Form I-9 Audit Process
4. Common mistakes made while completing Form I-9s
5. How to Conduct an Internal Audit on your Form I-9s and Non-Discrimination?
To register, here's the link: https://bit.ly/2xSLyVA