COVID-19

Treasury offers new guidance on PPP loan forgiveness

Justin Ho May 19, 2020
Heard on: Marketplace Morning Report
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The new guidelines mean businesses can bring back fewer employees and still meet the Treasury’s forgiveness requirements. Joe Raedle/Getty Images
COVID-19

Treasury offers new guidance on PPP loan forgiveness

Justin Ho May 19, 2020
The new guidelines mean businesses can bring back fewer employees and still meet the Treasury’s forgiveness requirements. Joe Raedle/Getty Images
Share Now on:
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On Friday, the Treasury Department released a new application form for businesses with Paycheck Protection Program loans to ask for loan forgiveness. Meeting the government’s requirements can be complicated for many businesses, but the 11-page application offers some new guidance.

The Treasury Department bases loan forgiveness on whether a business hires back its former employees, or whether it offers the equivalent of those jobs in full-time hours. Some businesses have wondered if full-time meant 30 hours a week, based on other agencies’ definitions in the past. Now, Treasury says businesses must use 40-hour weeks to calculate their full-time equivalent hours.

The new guidelines mean businesses can bring back fewer employees and still meet the Treasury’s forgiveness requirements, said Matt Hetrick, who runs an accounting firm called Harmony Group. For example, he said a business that offered 300 hours before the crisis only has to bring back roughly seven employees, using a 40-hour-week calculation. If that same business used a 30-hour-week calculation, it would have to bring back 10 employees to qualify for forgiveness.

Hetrick also said the new guidance raises the bar for how many hours employers can offer former employees to get them back to work. Stepping up the requirement to 40 hours could help businesses re-hire employees who used to be part-time and are now on unemployment.

“To entice people out of it, I think almost everybody’s offering full-time work, and trying to keep their headcounts mitigated for health reasons,” Hetrick said.

Hetrick also noted other guidance, including the Alternative Payroll Covered Period, which lets employers shift the start date of the eight weeks they have to spend their PPP loans. The eight-week period normally begins on the day the business receives the loan, but the alternative period lets businesses move the start date to the beginning of their next pay period. That can effectively let a business squeeze more paydays into its eight-week loan window, helping them meet the loan’s forgiveness requirements.

Still, the added clarity doesn’t help many businesses that have remained closed throughout the pandemic, said Ken Giddon, co-owner of Rothmans, a New York-based clothing store.

“We’re not open, we have no work for our people to do and they would prefer to stay on unemployment,” he said.

Giddon has a PPP loan, but said he’s having trouble spending enough of it on payroll to qualify for loan forgiveness.

COVID-19 Economy FAQs

Which businesses are allowed to reopen right now? And which businesses are actually doing so?

As a patchwork of states start to reopen, businesses that fall into a gray area are wondering when they can reopen. In many places, salons are still shuttered. Bars are mostly closed, too, although restaurants may be allowed to ramp up, depending on the state. “It’s kind of all over the place,” said Elizabeth Milito of the National Federation of Independent Business.

Will you be able to go on vacation this summer?

There’s no chance that this summer will be a normal season for vacations either in the U.S. or internationally. But that doesn’t mean a trip will be impossible. People will just have to be smart about it. That could mean vacations closer to home, especially with gas prices so low. Air travel will be possible this summer, even if it is a very different experience than usual.

When does the expanded COVID-19 unemployment insurance run out?

The CARES Act, passed by Congress and signed by President Donald Trump in March, authorized extra unemployment payments, increasing the amount of money, and broadening who qualifies. The increased unemployment benefits have an expiration date — an extra $600 per week the act authorized ends on July 31.

You can find answers to more questions here.

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