Jeff King is legal counsel for the World Floor Covering Association (WFCA), and an attorney with more than 35 years of experience in a wide range of cases including complex litigation, employment, corporate cases and others. The following are excerpts from a conversation we had with King about some of the elements surrounding the Paycheck Protection Program and other topics including business interruption insurance which can be viewed here.
TF: Talk about the Paycheck Protection Program and its loan forgiveness component.
King: Borrowers may be eligible for loan forgiveness for funds used for certain costs for an eight or 24-week period after disbursement. The 24-weeks is over for just about everybody by now. If you remember the loans were for eight weeks and could be extend to 24-weeks. There is a time to file for forgiveness and there are a number of factors that go into when one should file, but there has recently been a very sort of automatic forgiveness provision for loans under $50,000. It’s not totally automatic, but it’s pretty darn close.
Looking at any of the forgiveness forms, the full form is eight to 12 pages. The new, easy form is about four pages with some complicated calculations. The new form is much easier if you can fit into it. Your loan has to be $50,000 or less. One of the issues to get forgiveness is a sizable amount of calculations, one requirement is that 60% has to be paid on payroll. If you are an owner-employee, there is a cap on what you can pay yourself. It’s 2.5 times your normal pay up to $100,000, so it caps out at $20,833 if you use a 24-week period. There are also limits depending on whether you can include health care costs in such cases.
There are two other complicated calculations that have to be made. One of them is that your wage and salary cannot have decreased by more than 25%. If wages or salaries of your employees went down by more than 25%, you have to calculate that out. The problem with that is that it is per employee, so you couldn’t take a pay cut if you classify yourself as an owner-operator. The thinking here is that you could not stop paying yourself during this period so you could pay your employees longer. It actually says you can’t do that because that would mean you restricted your pay by more than 25% and you reduce the loan dollar for dollar below that.
The second one is for full-time equivalent employees. You have to have the same number of full-time employees. Equivalent means you add up your part-timers in order to get full forgiveness you have to have the same number.
This new forgiveness loan takes those two very complicated calculations away. Say you got the loan of $50,000 or less, 60% went to payroll. You agree with the cap on the employees and that you used it only for the stated purpose, you then sign it and you’re done. It’s all forgiven. You also need to keep all these records.The other loan requires the submission of documentation depending on your lender. This one for loans of $50,000 or less does not require any documentation.