Guidance to Help Organizations with PPP Loan Applications & Forgiveness
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) authorized the Paycheck Protection Program (PPP), which generated significant interest from small business owners. PPP loans are attractive to borrowers as the loan principal is forgivable under certain criteria; however, the first round of SBA funding drew widespread criticism. Because of the program’s quick rollout, ambiguous language, and changing criteria, government scrutiny and oversight have increased. Many borrowers are struggling to use loan proceeds for allowable costs, accurately document fund use, and make business decisions, such as hiring staff or offering supplemental payrolls, to enhance the forgiveness of the loan in an environment of uncertainty and rapidly changing guidance.
The 2021 Consolidated Appropriations Act, signed into law on December 27, 2020, provided another round of COVID-19 stimulus funding. This additional aid includes $284 billion in funding to reopen the PPP to new qualifying borrowers of “First Draw” PPP loans. It also provides opportunities for certain borrowers of existing PPP loans to increase their First Draw loan and certain businesses to obtain a “Second Draw” PPP loan.
PPP Strategic Consulting
BKD is offering a consultative service to assist you in navigating this challenging landscape. PPP strategic consults can provide guidance for management in decision making regarding, but not limited to:
- Assisting management in evaluating eligibility for a First Draw loan, increase to an existing First Draw loan, or a Second Draw PPP loan. This assistance includes consideration of other COVID-19 stimulus aid such as the Employee Retention Credit (ERC) and Shuttered Venue Operators Grant program
- Assisting management with recording the PPP loan in accounting records
- Assisting management with the lender’s forgiveness determination
- Assisting management in estimating the potential forgiveness amount
- Evaluating for reasonableness your calculation of full-time equivalent (FTE) head count reduction
- Evaluating for reasonableness your calculation of the salary reduction by employee and the $100K salary limitation
- Evaluating nonpayroll costs and timing of payment to help identify potential increased benefit
- Considering options to meet the 60 percent payroll cost threshold and eliminate FTE head count or salary reductions, if applicable
- Considering use of the 40 percent non-payroll cost limit to potentially free up wages that may be eligible for the ERC
- Using BKD’s forgiveness calculator to assist management with cash flow scenario consultations during the covered period
- Alternatively, our PPP loan forgiveness calculator is available for purchase if you are simply looking for a template to assist in performing your calculations
Agreed-Upon Procedures Engagements
Our team members can complete procedures in accordance with AICPA guidelines related to your documentation of expenses supporting your PPP loan forgiveness application. The procedures can be designed to provide the procedures and findings to lenders or the SBA.
Engaging BKD to complete agreed-upon procedures over your documentation could be beneficial prior to submitting your forgiveness application, and may be viewed as prudent governance for your audit committee, board members, and investors.