*** Revised 5/1/2020: Provided an exact definition, based on the SBA’s definition, for “Full-Time Equivalent Employees”.
The Paycheck Protection Program (or PPP) is an SBA loan that helps businesses maintain their workforce during the COVID-19 crisis. It is a low-interest loan, with a term of up to 10 years, no personal guarantee or collateral required, and payments are deferred up to 6 to 12 months.
The really important thing about the PPP, is that some portion of the PPP loan may be forgiven and not counted as income (i.e. not taxed), if it’s spent during the first 8 weeks on certain operating expenses with certain conditions (that are different from how you calculated the PPP Loan amount), and you maintain the same average number of employees at the same salary level (there are some specific rules on this, which are discussed below), otherwise the loan amount that may be forgiven is reduced (potentially significantly).
If you’re like me, the above paragraph didn’t sink in yet. So, let me be very blunt here: You have ONLY 8 WEEKS to manage the PPP funds properly, to maximize the forgiven amount. OTHERWISE, YOU WILL NEED TO PAY THE PPP LOAN BACK.
If you’re the recipient of PPP loan funds, it’s absolutely critical you understand that:
- The PPP is a loan. It is not a grant.
- The PPP funds must be paid back. Unless you meet some very specific criteria (to be discussed below).
- Even if some PPP funds are forgiven, it’s possible not all funds are forgiven.
How to Maximize the Amount of PPP Funds Forgiven
Every business is different, and it’s therefore impossible to tell you exactly whether it’s best or appropriate to minimize the amount of PPP funds that have to be paid back.
If you’ve determined that you want to pay as little back of those PPP funds as possible, then it’s critical that you:
- Carefully read the SBA Note you signed from your lender, and
- Understand and abide by “the Rules”.
What are “The Rules” to forgive all or a portion of the PPP loan?
It’s surprisingly difficult to answer this question by reviewing one document. The SBA Note doesn’t tell the whole story. The CARES Act itself is a monster of a document, and refers to other statues and acts.
The answer lies in this equation:
Forgiveness = (APF * AFTEE) – SWR
Where:
- APF means “Amount Possible to Forgive”
- AFTEE means “Average Full-Time Equivalent Employees” during the “Covered Period”
- Full-Time Equivalent Employee means a combination of employees, each of whom individually is not a full-time employee because they are not employed on average at least 30 hours per week, but who, in combination, are counted as the equivalent of a full-time employee (This is not defined in the CARES Act, but a definition used by the SBA).
- SWR means “Salary/Wage Reductions”
- Covered Period means the 8-week period starting when the loan originates (i.e. you receive the funds).
How do you calculate APF, or the Amount Possible to Forgive?
The amount available to forgive represents those funds used for:
- eligible* payroll costs,
- interest (not principal) payments on mortgage** that existed prior to February 15th, 2020,
- payments for rent / lease** that existed prior to February 15th, 2020, and/or
- utility*** payments for services that began prior to February 15th, 2020,
- within the Covered Period (i.e. within 8-weeks, starting from when you received the funds).
That is it. Nothing else.
*What are eligible payroll costs?
Payroll costs are defined in the CARES Act as all payments with respect to employees (full-time or part-time, but not contractors) that are or related to:
- salaries, wages, commissions or similar compensation,
- cash tips or equivalent,
- payment for vacation, parental family, medical or sick leave,
- allowance for dismissal or separation (i.e. severance payments),
- retirement benefits, and
- state or local tax assessed on employee compensation.
Payroll costs also include all payments with respect to contractors (or sole proprietors, not partnership or other vendors) that are related to:
- wage, commission, income or similar compensation,
- when such compensation is not more than $100,000 in a year, prorated for the time period in question
Payroll costs shall not include (and are specifically excluded) from:
- compensation of individual employees in excess of $100,000 annually, as prorated for the time period in question,
- employer contribution of federal withholding and FICA (IRS Chapters 21, 22 and 24),
- compensation of employees with a principal place of residence outside the US,
- qualified sick leave wage credits under Sect. 7003 of the Families First Coronavirus Response Act
Don’t let yourself get confused with the language in the CARES Act. It uses different definitions to determine allowable uses of loans versus the amount of loan forgiveness. You need to pay attention to the language in loan forgiveness, not allowable uses or even loan amount calculations.
For example, you can use PPP funds to pay for insurance premiums (related to employee benefits) and those costs incurred maintaining group health care benefits during periods of paid sick, medical or family leave. HOWEVER, these categories are not defined in Sect. 1106 (Loan Forgiveness) and therefore cannot be forgiven.
As another example, “payroll costs” are calculated on a gross basis without regard to taxes imposed or withheld, such as the employee’s and employer’s share of Federal Insurance Contributions Act (FICA) and income taxes required to be withheld from employees. HOWEVER, payroll costs do not include the employer’s share of payroll tax (only that which is required to be withheld from the employee).
Here’s what the SBA says about this:
- “The definition of ‘payroll costs‘ in the CARES Act, 15 U.S.C. 636(a)(36)(A)(viii), excludes ‘taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period,‘ defined as February 15, 2020, to June 30, 2020. As described above, the SBA interprets this statutory exclusion to mean that payroll costs are calculated on a gross basis, without subtracting federal taxes that are imposed on the employee or withheld from employee wages. Unlike employer-side payroll taxes, such employee-side taxes are ordinarily expressed as a reduction in employee take-home pay; their exclusion from the definition of payroll costs means payroll costs should not be reduced based on taxes imposed on the employee or withheld from employee wages.
This interpretation is consistent with the text of the statute and advances the legislative purpose of ensuring workers remain paid and employed. Further, because the reference period for determining a borrower’s maximum loan amount will largely or entirely precede the period from February 15, 2020, to June 30, 2020, and the period during which borrowers will be subject to the restrictions on allowable uses of the loans may extend beyond that period, for
purposes of the determination of allowable uses of loans and the amount of loan forgiveness, this statutory exclusion will apply with respect to such taxes imposed or withheld at any time, not only during such period.”
**Beware of payments to mortgages and lease
The CARES Act permits payments to mortgages (interest only) and leases, but there are a number of areas you need to really think about and take care.
(1) Only the interest on mortgages is covered, not the principal. Since most mortgages are simple interest, a mortgage payment consists of an interest component and a principal component — and both components change from one month to the next. In order to win any forgiveness of mortgage payments, you’re going to need to (1) validly prove to your Lender what the interest portion of the payments are, and (2) have such payments be twenty-five (25%) percent or less of the overall funds being forgiven.
(2) It’s critical the COMPANY NAME on the mortgage and/or lease match the COMPANY NAME indicated on the SBA Note (i.e. name of the borrower). If the SBA Note is in the name of your company, but the lease is in your personal name, you may have a problem. START NOW TO TRY AND RESOLVE THIS — DON’T WAIT.
***What Utilities are Covered?
The CARES Act identifies electricity, gas, water, transportation, telephone or Internet access — for service that began prior to February 15th, 2020.
How do you calculate AFTEE, or the Average Full-Time Equivalent Employees?
AFTEE is a fraction, where the numerator (i.e. the number on the top) equals the “average number of full-time equivalent employees (FTE’s) per month” employed by you (i.e. the borrower) during the Covered Period, and the denominator (i.e. the number on the bottom of the fraction) equals either:
- The average number of FTE’s during the period of February 15, 2019 to June 30th, 2019; or
- The average number of FTE’s during the period of January 1st, 2020 to February 29th, 2020.
At the borrower’s election, unless you’re a “seasonal employer,” then you must use the February 15, 2019 to June 30th, 2019 average.
This fraction must be between one (1) and zero (0). If you calculate a number greater than 1, then make it 1.
Average number of FTE’s is “the average number of full-time equivalent employees for each pay period falling within a month.” (See Sect. 1106(d)(2)(B)). The SBA defines “full-time equivalent employees” as “a combination of employees, each of whom individually is not a full-time employee because they are not employed on average at least 30 hours per week, but who, in combination, are counted as the equivalent of a full-time employee.”
Do you have two (2) 15-hour part-time employees? They would represent one (1) full-time equivalent employee.
Do you have two pay periods in a month? Then, determine the number of FTE’s for each pay period, add them together, and divide by two.
Here’s an example: Suppose you had 10 full-time equivalent employees (don’t count part-time employees and don’t count contractors) for one pay period in a month, and 11 in another pay period in that same month. Your average number of FTE’s is (10+11)/2, or 10.5.
This is a confusing calculation to make, because there are actually a number of different calculations. Worse, the calculation is somewhat easy if you pay weekly, semi-monthly or monthly, but what happens if you pay bi-weekly, and pay periods fall between months?
The CARES Act is silent to this, and it’s uncertain what the SBA will determine. The most literal interpretation of the statute is that you consider pay periods “falling within a month” and ignore pay periods that “fall between two months”.
Even worse, the CARES ACT seems to have been written to assume a Covered Period starts at the beginning of a calendar month, versus sometime within a month. How does a one calculate “the average number of full-time equivalent employees per month employed by the eligible recipient during the covered period,” (see Sect. 1106(d)(2)(A)), when the Covered Period is between months? The most literal interpretation is to assume that all months containing the Covered Period will apply (i.e. if your Covered Period starts April 15th, 2020 and goes to June 14th, 2020, then you would want to look at the months of April, May and June).
It’s hard to provide accurate guidance here. This will eventually be worked out by the SBA and/or your lender, and what you need to do, is decide whether you want to (1) use numbers most favorable to you, and fight the good fight when it comes time to debating this with your Lender, or (2) assume the worst and use numbers least favorable to you, so you manage your business assuming the worst.
Based on the above, I recommend you follow these steps to calculate AFTEE, or the Average Full-Time Equivalent Employees, in my equation above:
- Figure out the average FTE’s for each month, for the following months:
- The months containing your Covered Period (AA),
- February 2019 to June 2019 (BB), and
- January 2020 to February 2020 (CC).
- Calculate the average FTE’s for each of the ranges of months above. That is, what is the average for (AA), (BB) and (CC) above?
- The NUMERATOR is the average you calculated for the months containing your Covered Period, or (AA) above.
- The DENOMINATOR is the SMALLER OF (BB) or (CC), above.
- AFTEE equals NUMERATOR divided by DENOMINATOR. If the number is greater than one (1), then make it one (1).
Note that there are exceptions here for re-hires. See Sect. 1106(d)(5). The language is complex and beyond the scope of this article (although we’ll certainly comment on it later, but in the meantime, read Question #8 in this Fortune article).
How do you calculate SWR, or the Salary/Wage Reductions?
Finally, the amount of loan forgiveness must be reduced by any reductions to salaries or wages of certain employees, in excess of twenty-five (25%) percent (See Sect. 1106(d)(3)(A)-(B)). Here’s the actual language of the Act:
- (3) REDUCTION RELATING TO SALARY AND WAGES.—
(A) IN GENERAL.—The amount of loan forgiveness under this section shall be reduced by the amount of any reduction in total salary or wages of any employee described in subparagraph (B) during the covered period that is in excess of 25 percent of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period.
(B) EMPLOYEES DESCRIBED.—An employee described in this subparagraph is any employee who did not receive, during any single pay period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000.
(B) above is easy to decipher: Only certain employees are covered here. Specifically, those who haven’t earned more than $100,000, annualized, in any one pay period in 2019. So, if you have employees earning under $100,000 a year, but you bonus them and an employee earned a large bonus in one pay period, that if annualized, would be more than $100,000 a year, then that employee is not covered under this section.
What’s impossible to decipher is (A) above. Taken literally, it seems to force a comparison of salary or wages paid in the previous quarter (i.e. 12 weeks) to the 8-week Covered Period. Does this mean the forgiveness will be automatically reduced, given 8 is only 67% of 12, which represents a 33% reduction?
Only the SBA or courts will answer this, but I think the safe bet is to assume the Congressional intent is to look at the “average monthly total salary or wages paid to such employee in the previous full quarter,” and compare it to the “average monthly total salary or wages paid to such employee in the Covered Period.”
Of course, the Act doesn’t say that specifically, but I don’t know how to otherwise fairly interpret this section. I will update this article as we learn more.
But beware, if you’ve reduced salaries or wages, you’re going to have to reduce the forgiveness amount by the reduction for every “certain employee” that is covered by this Section. It’s best to NOT reduce salaries or wages if you’re relying on PPP funds, and are trying to maximize the forgiveness amount.
In Summary
It is critical to figure out how to manage your business (and how you use the PPP funds) NOW, well before the end of the 8-week clock called the “Covered Period.”
Remember this equation:
Forgiveness = (APF * AFTEE) – SWR
Where:
- APF means “Amount Possible to Forgive”
- AFTEE means “Average Full-Time Equivalent Employees” during the “Covered Period”
- Full-Time Equivalent Employees means a combination of employees, each of whom individually is not a full-time employee because they are not employed on average at least 30 hours per week, but who, in combination, are counted as the equivalent of a full-time employee.
- SWR means “Salary/Wage Reductions”
- Covered Period means the 8-week period starting when the loan originates (i.e. you receive the funds).
Follow these “rules”:
- Spend the funds …
- within eight (8) weeks of receiving the funds,
- only on certain expenses, which are (This is “APF” in our equation above):
- eligible payroll costs,
- interest (not principal) payments on mortgage that existed prior to February 15th, 2020,
- payments for rent / lease that existed prior to February 15th, 2020, and/or
- utility payments for services that began prior to February 15th, 2020.
- and, seventy-five (75%) percent or more of the funds forgiven are spent on payroll costs.
- February 2019 to June 2019 (required if you’re a “seasonal employer”), or
- January 2020 to February 2020.
HUGE DISCLAIMER: This article is a very consolidated and significantly simplified interpretation of the CARES Act (itself hundreds of pages long), SBA rules and guidelines, and various academic interpretations (such as they are, given the CARES Act is only a couple of weeks old). THEREFORE, please do not rely on the above as your sole source for information. You should seek the advice of a professional CPA, tax or business attorney for further guidance. Also, please be aware that your Lender is required by the Act to make a determination as to your eligibility for forgiveness, and your Lender will rely on the SBA interpretation of the Act.
Law 4 Small Business, P.C. (L4SB). A little law now can save a lot later. A Slingshot company.
29 Comments
Do two part-time employees = 1 FTE. I’m asking because you say, “Here’s an example: Suppose you had 10 full-time employees (don’t count part-time employees and don’t count contractors) for one pay period in a month, and 11 in another pay period in that same month. Your average number of FTE’s is (10+11)/2, or 10.5.”
But should we count all employees when calculating AFTEE?
Hi, Ben.
*** THIS IS A REVISED ANSWER ***
I’ve found some documentation at the SBA that defines a “full-time equivalent employee” as follows:
The Full-Time Equivalent Employee is a combination of employees, each of whom individually is not a full-time employee because they are not employed on average at least 30 hours per week, but who, in combination, are counted as the equivalent of a full-time employee.
The CARES Act does not define what a “full-time equivalent employee” is, therefore I think it’s safe to assume SBA definitions will be appropriate.
Given this definition, then two (2) 15-hour part-time employees can be counted as one (1) full-time equivalent employee.
Larry.
Larry – so, a crucial calculation is the comparison of average FTE during the covered period to one of the two comparison periods, what you are calling (AA), (BB), (CC). Do part time employees count for (BB) and (CC)?
Also, do you know if the SBA has issued any clarification about what happens when the covered period doesn’t start on the beginning of the month. My PPP loan originated on April 22nd, so does that mean when I’m calculating “average monthly FTE for the covered period”, do I need to include all the pay periods that fall in the Months April – June?
Great article by the way!
Ben
Hi, Ben.
I answered a previous question of yours, and changed my answer. Look at the new answer, and apply that answer here. Specifically, you can count part-time employees, in as much as their aggregate contribution to the full-time equivalent calculation.
Unfortunately, I don’t have any further information to give you regarding your question regarding “clarification about what happens when the covered period doesn’t start on the beginning of the month”. I will be looking into this, and when I can, I will update this article.
Thank you. Larry.
Thank You!
Where I’m stumped is how to calculate withholdings when I pay my employees with PPP funds. Do I pay them the gross amount and not take out Federal withholdings? Do I treat it like a “normal” pay period? If I do withhold, the SBA won’t forgive that amount, right? This makes my head hurt.
Hi, Andrea.
Welcome to the club! I think this is making everyone’s head hurt.
First, please do NOT change how you do withholding for your employees. Treat your payroll as normal. These issues relate to what the SBA will forgive.
Second, you are correct, some of the withholding will not be forgiven. The question is, how can you manage that? Let’s say you received $100,000 of PPP funds, and you use all $100,000 for payroll. It’s clear you will have to pay some of that back (i.e. those funds that are not forgivable), in my example and let’s say $10,000 will not be forgivable in this example. The question is, what happens if you spend some of those PPP funds on utilities and rents, instead of all of it on payroll? Let’s say you spent $10,000 on such expenses. Can those expenses offset the unforgivable payroll funds, such that you don’t have any PPP funds to pay back?
That’s the million-dollar question, and I don’t know the answer to that. I’m sorry.
Larry.
I had 5 employees before the lockdown and just got the ppp I can only keep 2 of them cuz not enough work. Can I pay them more to stay and still make the 75% requirements?
Your AFTEE as I’ve defined above will still be a small fraction.
You can certainly pay your folks as you’ve indicated, but it will go against you as it relates to what funds you’ll need to pay back.
There are rules about not being able to reduce your employees’ pay, but can you pay your employees more than they made before the loan was received? (keeping in mind the 100K limit of course). The reason I ask is that we had our health insurance renewals and had to reduce the % that the company previously paid on our employees’ behalf (because we were not sure if we were going to get the PPP funds or not). I was planning on increasing their pay to make up for the fact that we reduced how much the company pays for their health insurance. (in hindsight, it probably worked out better that we reduced the portion that the company pays for their health insurance because I thought that employER paid health insurance portions were going to be part of the forgiven payroll costs, but according to your article, it is not). We kept the same number of employees so there was no reduction in the number of employees part of the equation. So can I pay them more than they were making previously?
It does seem the statute permits what you are proposing.
Can I pay my normally full time employees with PPP funds for hours that they work – but those hours are NOT back to full time hours? And if so, can they still claim unemployment for when they do not work? PPP for what they do work and still receive unemployment to make up the difference (when applicable). I plan to have everyone back to their average hours by June 30th but I don’t have the work yet to bring them back all at once and at full hours.
Hi, Becky.
Yes, you can use the PPP funds to pay employees, whether full time or part-time, and whether you’re paying full-time folks only part-time, because that’s all the work you have. Note that you may end up not having all the funds forgiven, however, and may need to pay some of it back under this scenario.
Second, your question regarding whether underutilized employees only getting paid for part-time work but who have been full-time prior to COVID-19 get unemployment is a state-level question. We are unfortunately not licensed in all states, and therefore cannot give you an answer for all states. I can say if you’re located in New Mexico, the answer is YES, employees (full-time, part-time and now/temporarily even independent contractors and those who are self-employed) who have experienced a reduction of hours/income may be eligible for unemployment and are being encouraged to apply in the State of New Mexico.
Thank you. Larry.
Thanks Larry – I’m just concerned that I am not allowed to pay with PPP money for the hours that they actually work (not full time yet) and they stay on unemployment (MI). Example: Bob normally gets 40 hours a week but now is down to 15 hours or less depending on the week. So, he currently calls into unemployment and reports the hours he works and his earnings. Unemployment then through their calculations sends him funds but not the full amount because he did have some income – Bob still gets the full $600 extra though. Can I use the PPP funds for paying him his 15 hours and he still collect his unemployment for the difference? By the end of June I will have Bob back to full hours/pay but until then I don’t want to jeopardize our PPP funds nor his unemployment – because right now Bob makes more on unemployment than his full time pay (due to the $600/week extra). If me using PPP money for his less than full time hours/earnings doesn’t allow him to stay on unemployment – there’s no way I’m going to have a happy employee and it is understandably so. That extra $600 really has put some companies between a rock and a hard place with certain employees. (in our state – this is apparently called underemployment or hours reduced – but its through the same unemployment web site/system as anyone that is fully unemployed).
I understand that some funds may not be forgiven because I haven’t spent the full PPP amount by June 30th. I just want to make sure that I can use the funds this way and not have any repercussions other than the potential non-forgiven for the amount of funds that we did not use by the due date.
Hi, Becky.
You can definitely use the PPP funds to pay employees, part-time or full-time. That’s where the analysis needs to end. I really cannot tell you whether Bob (in your example) qualifies or can still collect unemployment. That’s handled at the state-level. I would caution you from taking any responsibility for what Bob can and cannot do with respect to unemployment. You need to focus on what your business can do, period, and leave the unemployment to Bob and your other employees.
The reason for this, is unless you’re going to hire an expert in this area, you may not know the correct answer or worse, things could change and are otherwise outside your control. Creating any sort of employee expectation on you or the company that you’re going to “pay them properly” so they can collect unemployment is just asking for trouble.
You need to distance yourself (and the company) from making committments with respect to unemployment compensation.
Larry.
We just received our PPP loan, we had been paying employees their salaries for 7 weeks. The PPP was funded the week we were able to return to work. Can we use the PPP for current payroll if work has start for us again?
Thank you for your time.
Hi, Mary.
Thank you for your question, but I’m not sure I’m understanding it. It reads to me as though you’re asking whether you can use your PPP funds for current payroll? The answer to that is “yes,” because that’s exactly what the PPP program is for.
I thought, perhaps, you were asking if you can use the PPP funds to reimburse yourselves for salary paid while the business was closed. I don’t think you asked that, but if you did, I would say “no.”
Please clarify your question, and I’ll do my best.
Thank you. Larry.
My “employer” got less $ from the PPP than he expected. Now, he is canceling my health insurance as of June 1st. I have medical conditions and with everything shut down, even if I can get on QUEST, which is Hawaii’s state funded program, my current physicians including my therapist do not accept this insurance. It would be so difficult to find new doctors and a process I am honestly not physically or mentally prepared to do. Can he legally do this? Mahalo in advance for your help!!!
Hi, Rebecca.
Every state is different, and I am not licensed to practice in HI. I will say, if you asked this question and it referred to New Mexico, I would tell you “yes” an employee can do this. I don’t know if there are specific state prohibitions or limits on how employers can change health benefits, so you really need to consult with an “employment lawyer” in Hawaii.
I do think it’s important that employers can change expenses quickly, though, otherwise I think you’re going to see more small businesses close down. Many small businesses have trouble meeting payroll in the best of times, let alone in these COVID-19 challenged times.
Larry.
I am considered a full time employee at my place of work, but I also must meet certain goals each month to ensure my full pay. If I am unable to meet these goals due to the economy and my employer uses PPP loan money to pay my normal rate (as if i were reaching my goal), are they allowed to ask me to pay them back the difference between my base salary and what my goals should have been at after they use the PPP money?
Hi, Jennifer.
I think that would be very dangerous for your employer, and I would not advise it for several reasons.
Larry.
Hello
Our company has employees but we use alot of Outside Instructors and Divers (1099) at the end of the year. Can I pay the outside contractors out of the PPP funds.
The outside contractors have always been used to keep the business running.
It is my understanding that YES, you can use the PPP funds to pay 1099 contractors. HOWEVER, based on the article above, you cannot forgive such monies — which means you’ll need to pay back such funds.
Hello
Our business also has leased employees for the Commercial side. This is so we have workman comp to meet the needs of the contracts we have.
Question: What is deductible from PPP They bill us gross wages+ Fica (SS & Med)+ Futa +SUTA+ Management fee +Workers comp
Thanks for your assistance
Also never heard back about being able to use PPP funds on Contract Divers & Instructors a vital part of the company
Hi, Deborah.
The statute says “FTE equivalent” employees. Contractors do not count here, even if you hire them full time. The SBA is about to issue guidelines (I’m hoping this week), so stay tuned for some adjustments.
In regards to your other question, I do not recall seeing it (my apologies). Do you mind resubmitting?
Thank you. Larry.
I am self-employed and received ppp monies on 5/21. Between that date and June 30 is shorter than 8 weeks. Am I able to pay myself back pay so that I can take advantage of the full 8 weeks of pay?
8 weeks is the current time period calculated, and the statute is silent on backpay so I don’t know how to advise you. I will say, however, that the SBA is currently working on guidelines so you should review those as soon as they come out (I’m guessing later this week).
Here is my question, I kept all my employees on the payroll but my business did not suffer one dime as far as revenue. Do I get to keep the PPP money since my business didn’t suffer. I was told that small amounts of PPP ( under 350000) if not used will be forgiven since there is no auditors to go after the money. Thanks.
Hi, Mike.
The last time I checked, “suffering” is not identified as a factor on whether you need to pay back the PPP or not. 😉 I say that in jest, but I hope you get my point. What matters is not whether your business lost money or not (although that is a factor on whether you’re eligible for a second draw), but the allowable expenses and your FTE’s during the relevant periods.
As it relates to the second part of your question, it’s not an issue of “no auditors”. I assure you, the SBA and Feds will ultimately find cheats and prosecute. It’s a matter of whether you qualify for the simplified PPP Loan Forgiveness Form, although I believe the limit is $150k, not $350k. See https://www.sba.gov/document/sba-form-3508s-ppp-loan-forgiveness-form-3508s.
With all of that said, I haven’t done my latest due diligence related to all the new legislation, so my information above may be a bit outdated. If anyone has new / updated information, please share.
Thank you. Larry.