COVID-19

Receiving a PPP loan is one thing. Having it forgiven is another.

Justin Ho May 7, 2020
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A waitress disinfects a table at a restaurant on May 5 in Stillwater, Oklahoma. One requirement of the Paycheck Protection Program is to bring back all full-time-equivalent employees. Johannes Eisele/AFP via Getty Images
COVID-19

Receiving a PPP loan is one thing. Having it forgiven is another.

Justin Ho May 7, 2020
Heard on:
A waitress disinfects a table at a restaurant on May 5 in Stillwater, Oklahoma. One requirement of the Paycheck Protection Program is to bring back all full-time-equivalent employees. Johannes Eisele/AFP via Getty Images
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One of the big reasons why Paycheck Protection Program loans are in such high demand is that the loans can be forgiven by the government. However, there are requirements for that forgiveness component of the program. For instance, a business has to bring back its full-time-equivalent employees for the loan to be fully forgiven. Many businesses that received PPP loans are finding that meeting those requirements can be a tricky process.

Bringing headcount back up to pre-crisis levels wasn’t so easy for David McBride, an optometrist who runs a vision clinic in Portland, Oregon. He applied for a loan after the state shut down nonemergency medical care in March.

“We weren’t seeing patients,” McBride said. “It doesn’t do any good to have my staff sitting in here doing nothing.”

So McBride went to his accountant.

“And I’m like, well, maybe. You might have to pay them to sit at home,” said Lorilyn Wilson, who owns an accounting firm called Collective. She said a lot of her clients are grappling with the forgiveness requirements. “It’s like, ‘Now we have the funding, so what’s the best way we can maximize that forgiveness?'”

Businesses have to spend 75% of their loans on payroll, which can be a challenge if they’re operating with limited staff. Luke Wake is an attorney with the National Federation of Independent Business.

“Some people are going to begin giving bonuses — incentive pay for people who actually are reporting when they’re operating on that skeleton crew,” Wake said.

One complicating factor is that businesses have eight weeks to use the money starting the moment they receive the loans. Wake said many businesses are already a few weeks into that eight-week window.

“I’ve heard from a lot of people who’ve said ‘I wish that I had some flexibility to adjust that a little bit, so that it didn’t necessarily begin to run the moment I got the money from the bank,'” Wake said.

It can also be difficult to recall employees when many are getting unemployment insurance, which includes an additional $600 a week in emergency pandemic benefits.

This month, the Treasury Department said loans can be forgiven if businesses offer employees their jobs back. But doing so could mean those employees no longer qualify for unemployment insurance.

Matt Hetrick, who runs an accounting firm called Harmony Group, said that forces business owners into an ethical dilemma.

“If you’re bringing them back into situations that are unsafe, or you’re forcing them to give up their unemployment so you can hit your PPP, I think that’s a dangerous situation,” Hetrick said.

Back in Portland, Oregon, the government opened up nonemergency care last week. McBride brought most of his employees back, and he thinks he’ll qualify for loan forgiveness. In the meantime, he’s ramping up safety measures around the clinic.

COVID-19 Economy FAQs

What do I need to know about tax season this year?

Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.

How long will it be until the economy is back to normal?

It feels like things are getting better, more and more people getting vaccinated, more businesses opening, but we’re not entirely out of the woods. To illustrate: two recent pieces of news from the Centers for Disease Control. Item 1: The CDC is extending its tenant eviction moratorium to June 30. Item 2: The cruise industry didn’t get what it wanted — restrictions on sailing from U.S. ports will stay in place until November. Very different issues with different stakes, but both point to the fact that the CDC thinks we still have a ways to go before the pandemic is over, according to Dr. Philip Landrigan, who used to work at the CDC and now teaches at Boston College.

How are those COVID relief payments affecting consumers?

Payments started going out within days of President Joe Biden signing the American Rescue Plan, and that’s been a big shot in the arm for consumers, said John Leer at Morning Consult, which polls Americans every day. “Consumer confidence is really on a tear. They are growing more confident at a faster rate than they have following the prior two stimulus packages.” Leer said this time around the checks are bigger and they’re getting out faster. Now, rising confidence is likely to spark more consumer spending. But Lisa Rowan at Forbes Advisor said it’s not clear how much or how fast.

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