How can businesses get their PPP loans canceled?
On Friday, the Treasury Department released a New application form For Businesses Receiving Paycheck Protection Program Loans To Request Loan Remission Meeting government requirements can be complicated for many businesses, but the 11-page application offers new guidance.
The Treasury Department bases loan forgiveness on whether a company re-hires former employees or offers the equivalent of those full-time jobs. Some companies have questioned whether full time means 30 hours per week, based on definitions from other agencies in the past. Now the Treasury says companies should use 40-hour weeks to calculate their full-time equivalent hours.
The new guidelines mean companies can bring back fewer employees while still meeting Treasury pardon requirements, said Matt Hetrick, who heads an accounting firm called Harmony Group. For example, he said that a company that offered 300 hours before the crisis only needs to bring back about seven employees, using a calculation of 40 hours per week. If this same company used a calculation of 30 hours per week, it would have to bring back 10 employees to be entitled to pardon.
Hetrick also said the new guidelines raise the bar for the number of hours employers can offer former employees to get them back to work. Raising the requirement to 40 hours could help companies rehire employees who were previously part-time and are now unemployed.
“To attract people, I think almost everyone offers a full-time job and tries to limit their workforce for health reasons,” Hetrick said.
Hetrick also noted other guidelines, including the Alternative Payroll Coverage Period, which allows employers to shift the start date of the eight weeks they have to spend their P3 loans. The eight week period normally begins the day the business receives the loan, but the alternate period allows businesses to move the start date to the start of their next pay period. This can effectively save a business more pay days in its eight week loan window, helping it meet loan forgiveness requirements.
Still, the added clarity doesn’t help many businesses that have remained shut down throughout the pandemic, said Ken Giddon, co-owner of Rothmans, a New York-based clothing store.
“We are not open, we have no work for our people to do and they would rather remain unemployed,” he said.
Giddon has a PPP loan, but said he struggles to spend enough on payroll to qualify for a loan forgiveness.