PPP was a govt response to the economic shut down. The govt forced businesses to shut their companies down and not work. If a small business took the loan they had very specific requirements laid out ahead of time for reimbursement. The purpose was that it would be a grant but they needed to make sure the rules were followed or they had to pay back the loan at 1% interest. It was only to be a loan to those that skirted the rules and requirements.
Student loans are loans people took out because they wanted a college degree. No loan forgiveness was offered other than the 20/25 years rule or certain other requirements such as certain time in a specific industry like Special Education teachers.
To even remotely compare government mandated business shutdown grants with personal loans taken out for college is utterly preposterous. It's not just a different ballpark it's a completely different game.
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PPP forgiveness requirements You’re poised for PPP forgiveness when your small business meets the following requirements.
You spent PPP funds in 8 or 24 weeks You need to account for where and when you spent each dollar in the forgiveness application. The December COVID-19 relief package allows PPP borrowers to choose to have their loan period cover eight or 24 weeks.
PPP recipients are asking themselves: Which is better? Since you don’t have to decide until you apply for forgiveness, run the forgiveness calculation using both periods. Choose whichever results in the higher forgiveness amount.
You met the 60% rule PPP allows for full forgiveness when at least 60% of the PPP funds go toward eligible payroll costs (it had previously been 75%).
For full forgiveness, the remaining 40% must go toward:
Additional payroll costs
Mortgage interest
Rent
Utilities
Personal protective equipment and facility modification to help you comply with COVID-19 federal health and safety guidelines
Operating expenses for software, cloud computing services, and accounting
Essential payments to suppliers for your business’s operations
You might not recognize the last three items on the list above; the December stimulus package added them to the list of non-payroll-covered expenses.
Say your business received a $200,000 PPP loan; at least $120,000 must have gone toward eligible payroll costs. Simple enough, right? Wrong. The word “eligible” creates some mess.
If you’re a pass-through business owner, PPP loans are calculated based on your business’s 2019 net profits -- to account for owner compensation -- and average monthly employee payroll costs. The catch is earnings above $100,000 on an annualized basis were reduced to $100,000 for the calculation.
Say that one of your employees earns $125,000 annually. You could only count 80% of her wages toward the 60% payroll cost requirement ($100,000 limit Ă· $125,000 salary = 80% of total wages eligible for forgiveness).
Businesses that don’t pass the 60% rule can still apply for partial forgiveness. If you spend just $100,000 on payroll costs using the $200,000 PPP loan, the maximum forgiveness becomes $166,667 ($200,000 total loan ✕ [$100,000 used on payroll ÷ $120,000 allocated for payroll]).
You kept employees on the payroll Legislators implemented the PPP to keep people employed during the pandemic. You need to bring your employee headcount back to pre-pandemic levels to receive full loan forgiveness.
The SBA calculates employee headcount using full-time equivalents (FTE), where a person who works 40 or more hours per week counts as one FTE. Someone who works 10 hours per week is 0.25 FTE (10 hours worked ÷ 40-hour workweek). Or you can opt for the SBA’s simplified FTE method by counting any part-time employee, regardless of hours worked, at 0.5 FTE.
Compare your FTE during the loan period to the average FTE during one of the following periods. If your FTE is the same as or higher than one of the periods below, you qualify for full payroll forgiveness:
Feb. 15, 2019, to June 30, 2019
Jan. 1, 2020, to Feb. 29, 2020
Your loan forgiveness drops when you don’t bring your FTE back to its pre-pandemic levels. For example, if you only rehire three of your four employees, your maximum forgiveness becomes 75% of the total loan amount.
You might qualify for full forgiveness if:
Safety requirements prevent you from returning to pre-pandemic operating levels.
Your headcount declines because of employees who are justifiably fired or voluntarily resign.
The SBA also cuts slack on rehiring employees:
You have until Dec. 31 to rehire employees laid off between Feb. 15 and April 26 due to the pandemic.
Employees who formally reject your written re-employment offer at the same pay and hours don’t count as staff reductions.
Your headcount isn’t affected by employees who ask for and are granted a reduction in working hours.
You didn’t reduce salaries and wages by more than 25% For full forgiveness, employee salary and wages can’t fall below 75% of what they were when applying for the PPP. Any further reduction lowers the forgiveness amount. The wage reduction rule applies to employees whose annualized salaries are less than $100,000.
Say you were paying an employee $5,000 per month when you applied for the PPP loan. Financial circumstances led you to reduce his pay to $3,500 per month, a 30% decrease. The maximum wage reduction without penalty is 25%, which would’ve left him with $3,750 monthly.
Your forgiveness amount is reduced by $250 multiplied by your PPP loan period. If your PPP period is 24 weeks, the forgiveness amount is reduced by $1,500 ($250 additional monthly reduction âś• 6-month PPP period).
