PPP Loan Forgiveness

The Payment Protection Program (PPP) Flexibility Act of 2020 was designed to modify certain provisions related to loan forgiveness under the paycheck protection program. It lets recipients defer payroll taxes and other business-related expenses. In other words, the program helps relieve small businesses and their employees from the economic impact of COVID-19.

As of this writing, the information provided is based on official Small Business Administration (SBA) guidance from the SBA’s PPP Loan Forgiveness Application Form (SBA Form 3508) and has been updated with information from the more recent Payroll Protection Program Flexibility Act.

The deadline to apply for a PPP loan has been extended to August 8, 2020. For more information, go to Fundbox.com to apply.

What is PPP?
The Payment Protection Program (PPP) helps business owners, including self-employed, who want to apply for a loan that’s 2.5 times their average monthly payroll.

According to the Coronavirus Aid, Relief, and Economic Security Act (CARES), which established the PPP loan to help small businesses maintain their employees and their payroll (or your own expected income in the case of sole proprietors or independent contractors) over the next of 24 weeks, qualified businesses can borrow up to $10 million at a 1% interest rate, calculated based on 2.5 times your average monthly payroll costs.

The CARES Act is designed to keep employees (or yourself) paid and employed, with some allowance for operating expenses, such as business rent, vehicle payments, and utilities. Generally, your business may be eligible for full loan forgiveness if you allocate 60% of the loan money to keeping all your full-time equivalent staff on the payroll, and you allot no more than 40% for other overhead. If you fail to meet these requirements by using less than 60% of the loan amount for payroll costs during the forgiveness covered period, you may be eligible for partial loan forgiveness, according to a joint statement issued by SBA Administrator Jovita Carranza and Treasury Secretary Steven Mnuchin.

The PPA loan is a 1% interest loan that can be converted into a grant—provided you spend the funds according to the rules as outlined. However, loan forgiveness isn’t automatic. As a borrower, you’ll have to request and submit detailed forgiveness documentation to your lender.

Completing the PPP Loan Application

The most complicated part of filling out the forgiveness application is completing the payroll sections, which cover:

  • Salary, wages, commissions, or similar compensation
  • Payment of cash tips or equivalent, based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips
  • Payment for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Payment that covers employee benefits, including insurance premiums (employer cost)
  • Payment of any retirement benefit (employer cost)
  • Payment of state or local tax assessed on employee compensation
  • During the covered period, you must spend the funds on specific items, mainly payroll
  • Apply for forgiveness through your lender and provide the required documentation
  • Lender has up to 60 days to respond to your request for forgiveness and ideally agree. This is when the balance is forgiven
  • Any balance not forgiven becomes a loan at 1% interest for 2 years or 5 years, provided the loan is made on or after June 5, 2020.

Because the application involves configuring a number of calculations, consider getting help from your accountant or financial advisor.

Now That I have the PPP Loan…
… you now have 24 weeks (or until December 31, 2020, whichever comes sooner) to use the funds appropriately. Otherwise, you’ll have to repay the loan within the next 5-10 years (depending on your lender).
You need to keep top-of-mind two overarching principles related to the PPP loan program: follow the PPP’s intent and keep detailed evidence, including records/documentation during the loan forgiveness period, and copies of the documents you provided when applying to your PPP lender.

Once your loan has been approved, you’ll receive an email with an SBA loan number and loan amount. Do the math immediately, because you’ll need to know three important facts:

  • Calculate 60% of the total loan amount you receive and earmark it for payroll. That’s the minimum you must spend on payroll over the next 24 weeks (if approved prior to June 5, 2020, you can select an 8-week period) to be eligible for full forgiveness. To keep it simple, say your loan is for $50,000. You’ll need to pay at least $30,000 of the loan to your employees.
  • Determine how much you paid your salaried and hourly employees.
  • Keep track of funds that covered payroll expenses during the forgiveness window or were sustained, which means the payroll costs were incurred during the forgiveness window but the pay date fell after the end of the forgiveness window.
  • Note how many FTE employees you have.
  • Configure each employee’s average monthly salary or wage.

Full-time equivalent (FTE) can take into account both full-time and part-time employees. Be aware that you must maintain the same number of FTE employees and their salaries during the 24-week forgiveness period, because your total loan forgiveness can be diminished if you reduced your employee headcount or compensation during this time.

To determine your exact number of FTE employees, enter the average number of hours paid per week, divide by 40, then round the total to the nearest tenth. The maximum for each employee needs to be capped at 1.0. More importantly, be sure to keep records that show how you configured these calculations.
Any reduction in loan forgiveness needs to be based on the difference between two numbers: the number of FTEs who work during the 24-week loan window and the number of FTEs who work during one of the following baseline periods (whichever is lower): February 15, 2019 to June 30, 2019 (19 weeks) or January 1, 2020 to February 29, 2020 (8 weeks).

Other Considerations

If your business happens to be seasonal, you can use either range of dates or any consecutive 12-week period between May 1, 2019 and September 15, 2019, whichever yields the lower FTEs.

As an example, if you had 20% fewer FTE employees during the full 24-week loan window, then your loan forgiveness may be reduced by 20%, respectively.

At all cost, make sure you avoid layoffs, because they can affect your loan forgiveness. If you had to lay off or temporarily furlough employees between February 15, 2020 and April 26, 2020, you can still avoid a reduction penalty provided that you rehire those employees or their equivalent by December 31, 2020, for them to be counted in the 24-week forgiveness period.

Even if those specific employees do not wish to return, as long as you hire equivalent employees to replace them, and you pay them at least 60% of the previous compensation, you can avoid the forgiveness penalty for reduction in pay.

If you’re self-employed, you’re entitled to use the PPP loan to replace lost compensation due to the impact of COVID-19. However, new guidance prevents self-employed individuals from claiming the entire amount as income replacement.
If you have mortgage interest, rent, or utility expenses, you must have claimed or be entitled to claim a deduction for those expenses on your 2019 Form 1040 Schedule C in order for to be eligible for forgiveness. This means that you need to either have your 2019 taxes filed, or prepared and ready to file.
If you worked in an office space in 2019 and did not have a home office, you cannot claim a deduction on your home mortgage interest. Even if you’re currently working at home, you’re not eligible to claim home mortgage interest payments for forgiveness.

If a laid off or furloughed employee refuses to come back and work the same hours at the same salary as prior to the layoff, you need to document this. It’s critical that you keep written records of this communication and the fact that the employee refused the offer, because you’ll need to include it with your loan forgiveness application. These particular FTE hours won’t be counted in your comparative averages, and you may still qualify for loan forgiveness.

If your business fails to restart, you may be exempt from the FTE headcount rule…if “the employer is able to document an inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.”

Even if it’s not timely for you to reopen your business, continue to pay your employees. This program was designed for small businesses to keep their employees rather than lay them off and put them on unemployment, according to Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce.

Avoid wage cuts; otherwise, your loan forgiveness may be reduced if you cut the average wage of an employee by more than 25% of their average wage based on what you paid them in 2019. Or, if 2019 data isn’t applicable, you need to base it on their gross wages in the first quarter of 2020. However, this rule doesn’t apply to employees who earned an annual salary of $100,000 or more in 2019. Or $8,333 per month.

You also need to keep in mind that there’s a limit to the cash compensation any individual employee receives this 24-week period.

If your business doesn’t return to its pre-February 15, 2020 status, you may be exempt from the FTE headcount rule, according to the PPPFA, as stated earlier.

Keep Track of Your PPL Loan

To help you track your PPL loan, consider opening a separate bank account. This will help you to better manage, track, and later document your loan’s appropriate usage. If you do this, don’t forget to switch your payroll withdrawal account to your dedicated PPP account for the 24-week period.

Monitor your progress about halfway through the forgiveness period. Keep track of how you spent the funds; if you find that 60% of your expenses haven’t gone towards payroll, or that your average FTE headcount or employee wages fall below your thresholds, you may still have time to make necessary adjustments, taking into consideration that you can consider “hazard pay” bonuses, give people promotions and raises, or hire new employees.

  • Make sure that you didn’t reduce your headcount during the forgiveness window (unless you can show good faith that you made every effort). Be sure that you paid each of your employees at least 75% of their average wage.
  • Make sure that you used up to 40% of the remainder of the loan to cover allowable expenses, including rent or mortgage payments for your business
  • Or interest payments on a mortgage or other loan (such as an auto loan) related to your business. However, any interest payments on any other debt incurred before February 15, 2020 is not eligible for loan forgiveness
  • Document making utility payments for your business

Also, keep track of when the covered period for loan forgiveness ends. If your loan forgiveness window has closed, whether on or before December 31, 2020, whichever comes sooner, you can submit a forgiveness request to your lender. You have 10 months after the last day of the covered period to apply for interest-free forgiveness. If you miss this deadline, you may have to make principal, interest, and fee payments on the covered loan beginning on the day that’s not earlier than the date 10 months after the last day of your covered period.

The following may seem repetitive, but it’s important to emphasize. Document how you used the PPP proceeds and show that you used at least 60% of the loan to cover payroll costs. If you’re an independent contractor, you need to prove that you replaced your compensation based on your 2019 net income.

Organize what you need before the end of the loan forgiveness program. Find out if your lender requires specific documentation.

Once the documents have been submitted, your lender has 60 days to decide whether to issue loan forgiveness.

If you don’t receive loan forgiveness, know that the amounts not forgiven convert into a 1% interest loan, payable over the next 5-10 years, based on your lender. You even have a grace period where no payments would be required until the SBA remits the forgivable amount to your lender. If you don’t request forgiveness, you won’t have to make any payments for 10 months from the date of loan disbursement, but interest will still accrue from the date the loan was disbursed.

Whatever you do, be honest with how you use the funds. Otherwise, you could be subject to additional charges for making knowing violations or misappropriations. And, the SBA may have direct recourse against such a shareholder, member, or partner for unauthorized use.

Applicant Tracking Systems

Attracting and retaining skilled workers has grown exponentially more challenging, according to Manpower Group (www.gomanpowergroup.com, with 54% of companies globally reporting talent shortages—the highest level in over a decade. And, the U.S. Bureau of Labor claims there are 670,000 more job openings than unemployed potential workers (based on statistics prior to the 2020 coronavirus).

Applicant tracking system (ATS) software provides companies with recruiting and hiring tools that assist with human resources, recruitment, and hiring needs. While different systems offer their own unique features, ATS is primarily used to help companies organize, navigate, and hire vast numbers of applicants. What began as a resume parsing software 15 years ago has evolved into a variety of choices for strategic hiring and recruiting platforms.

Today, robust applicant tracking systems can integrate with background-check providers to easily handle checks and authorizations, send offer letters, and predict an applicant’s potential performance within a company.

When an applicant applies for a job online, initially, the resume is processed by an ATS before it’s forwarded to a recruiter or hiring manager. Whether or not that recruiter sees the candidate’s resume could depend on how well the resume is optimized for ATS algorithms.

It’s very common for top employers to screen for several jobs simultaneously. As a result, hundreds of resumes are received for any given opening. An ATS logs these resumes and helps recruiters and hiring managers stay organized and EEOC compliant. While these systems can help to narrow down the applicant pool, the process isn’t perfect and top candidates can still slip through the cracks.

According to Jobscan, a web service that helps job seekers land more interviews by using artificial intelligence (AI) to analyze a resume or LinkedIn profile against a job description, 99% of Fortune 500 companies use ATS as part of their recruiting strategy. KellyOCG, a global provider of workforce strategy and solutions, with operations/expertise in every aspect of the talent supply chain, has determined through a survey that approximately 66% of large companies and 35% of small organizations rely on recruitment software.

It’s common for an applicant’s resume to run through ATS, whether they’re applying directly through a company or by way of job sites, such as Indeed and LinkedIn.

ATS benefits recruiters and employers by providing features, such as:

  • Resume importing and sorting
  • Candidate stage tracking
  • Passive candidate sourcing
  • Job board management
  • Branded career sites
  • Multilingual applications
  • Employee referral management
  • Mobile applications
  • Interview scheduling and video interviewing
  • Interview feedback tools
  • Recruiting analytics
  • Predictive performance analytics
  • Background checks
  • Managing offer letters
  • Monitoring the quality of hire algorithms
  • Building employer brand and engagement through a customizable product
  • Job board management and candidate sourcing capabilities
  • Supporting multiple languages for a great candidate experience
  • Application simplicity via mobile and referral management
  • Interview scheduling feedback features
  • Data and recruiting analytics to determine recruiting effectiveness
  • Integrating with other talent acquisition and management tools

Applicant Tracking Systems…

… simplify managing requisitions and candidates; ATS can also integrate within a pre-existing career site to provide a seamless candidate experience, while automatically collecting and organizing applicant information. On average, companies receive around 250 applications per job opening. Once the application is submitted, the ATS can also rank the resume and application based on the required education, experience, skills, etc.

ATS can also assist with screening and interviewing. It offers video interviewing capabilities and interview scheduling tools that can help recruiters provide candidates with a better experience. They can also integrate with background check providers for easy checks and authorizations, send offer letters, and even predict an applicant’s potential performance within a company. In addition, it’s important for ATS to be mobile friendly and provide applicants with the convenience of applying anywhere, anytime.

How an ATS Works

With all the responsibilities recruiters and hiring professionals must deal with, approximately 75% use recruiting or applicant tracking software. Automation frees them from dealing with small, repetitive tasks, leaving time for more meaningful processes.

Word of mouth is powerful. While it’s important to attract the right candidates for positions within a company, if the application process doesn’t go well, candidates may never again apply for additional openings. And, they won’t hesitate to steer their friends away from such companies.

Most ATS merge with job boards, giving the team the benefit of distributing job postings across multiple job board platforms. ATS can also use automation to assist in filtering applications, screen candidates, and schedule interviews. For example:

  • Help recruiters coordinate multiple schedules simultaneously
  • Allow candidates to view interview availability and choose the date and time that works best for them
  • Dramatically reduce recruiters’ chances for errors disrupting the interview process and improve the candidate experience

Features, such as interview scheduling, help to speed up a recruiter’s time to hire and land talent before their competitors. Scheduling interviews can be time-consuming. ATS software helps reduce the administrative work involved in the hiring lifecycle. And, recruiters don’t juggle just one candidate, but hundreds, if not more. Plus, interviews can be scheduled with the click of a button, on the candidate’s own time.

ATS lets hiring teams analyze large data sets from recruitment activities, such as sourcing, screening, interview scheduling, etc., to helping recruiters better understand the difference between efficiency and time wasters.

Finding the Right ATS for Your Company

The system you select needs to align with how you work, making sure it’s not counterproductive to your team. How can you configure the system to meet your needs?

One solution is to get testimonials from clients who use the system you’re considering. Then, create a sample candidate and go through the process as the candidate to determine if it will work in your situation. This will give you a sense of ease of use, branding options, and functionality. Also, ask if there are any tools or options you can use to track the candidate experience or how it’s measured or defined.

Strict reporting policies need to be adhered to. Find out if sensitive data will be protected, determine how secure your data will be, and how frequently safeguards and standards will be updated. If you work in a specific industry, find out about the specifics related to your industry’s compliance and standards that mitigate risk.

Query about your tech stack, the list of technology services you use to build and run one single application, then send it to the representative conducting the demo to determine how he or she can answer your specific questions or offer case studies of other clients utilizing the same integration.

Recruitment Texting is a Must in 2020

If you aren’t engaging your candidates via texting, you’re falling behind. ATS texting helps you leverage the power of many candidates’ preferred method of communication. For example, if a person has set up texting notifications, he or she can see a preview without opening the message. If the text is short, they can probably see the whole message in the notification window.

Level the Playing Field

ATS extracts every candidate’s information and organizes it in the same format. In the profile template, there’s a field for each relevant piece of data. For example, there’s a field for each degree earned, previous job title, and skill.

This type of organization gives you searching superpowers. You can analyze and compare candidates based on work experience, education, or previous employers. Or job titles, skills, or demographic variables.

Then, in terms of resume filtering, the software uses keywords from the job posting and matches them with those found in resumes. Consider how long it takes to read a resume and compare it to an ATS that can parse thousands of resumes in seconds. This process weeds out candidates who don’t have the necessary qualifications and delivers a pool of qualified candidates before you review a single resume.

Screening Questions

An ATS allows you to add screening questions to your application to ensure potential candidates meet basic qualifications, such as education level or years of experience. Some ATS let you create scoring rules that weigh certain questions more heavily, so that better applicants automatically rise in your review queue.

To help further screen potential candidates, you can set up pre-screening questions to bypass those candidates who don’t meet the job criteria. You can ask questions, such as: “Are you able to work in the San Francisco office?” Or you can be extremely specific about the location: “Are you able to work 9 am – 5 pm PST in the office located at 479 Castro Street, San Francisco?” Answers to these questions can be set to “Yes” or “No,” where “No” would be a knock-out question.

Or, while you need to be aware of your state and local laws regarding salary questions, with some states no longer allowing salary-related questions, a work around solution might be to ask a pre-screening question, such as: “The salary for this position is $75,000-$85,000. Is this salary range acceptable to you?” The response would qualify or rule-out a potential candidate.

If you’re looking for candidates with a minimum amount of experience, you can offer the following ranges and ask if they have 1-year, 1-2 years, or 2 years of experience.

Beyond the Job Offer

Once you’ve found the best candidates, the ATS can streamline the hiring process, particularly if you’re using collaborative hiring—a team-based hiring method can structure your recruitment process to get colleagues from other parts of your business more involved. Many jobs require input from multiple decision-makers. ATS consolidates reviews and reports from every stakeholder, so hiring managers can consider everyone’s opinions.

Candidates can also be scored and rated separately, and a good ATS includes collaborative tools and reports, so everyone is on the same page. Want a background screening? Your ATS should be able to provide that, too. After you’ve extended an offer to your prospective employee, many applicant tracking systems offer additional features to help onboard the new hire.


Once the application process is complete, onboarding begins. Your new hire has documents to fill out, resources to review, and forms to e-sign. ATS software should feature an onboarding portal where you can consolidate documents. Through ATS software, your new hire should be able to sign in, review, and securely sign necessary paperwork, and use the portal as a resource to check back on onboarding documentation and company guidelines whenever they choose.

Your ATS may even sync with payroll, so you can quickly get your new hire into the system and properly compensated. Tasks can be created, edited, and managed for both the new hire and the hiring manager. And, with ATS, all of your documentation is secure and accessible in cloud storage.

Instituting Paperless Payroll

In today’s “fast-food” world, convenience is mandatory. It’s no different when it comes to paying your employees. As a result, payroll cards are a fast-growing option to more traditional forms of payroll payment, such as paper checks and bank direct deposit. Plus, failing to offer payroll alternatives can result in your company running the risk of missing out on talent and retaining experienced employees. With paycards, employees’ payments are directly deposited onto a debit card without the need for a bank or cash checking service as the middleman. Payroll debit cards are reloadable pre-paid cards that employers can use to deposit their employees’ net wages. In turn, workers can conveniently use them to make purchases, withdraw cash, and pay bills.

Payroll debit cards are a win/win for you, the employer, and your employees. A top reason to use them includes boosting employee satisfaction, because, in addition to helping to retain employees, they simplify your payroll process.

When using payroll debit cards, your employees:

  • Gain immediate access to funds, once they’re deposited. They no longer have to cash a check, take time during lunch to make a deposit, or incur check cashing fees.
  • If an employee doesn’t have a bank account, they can still access their money by using a paycard, provided paycards are permitted in your state and all rules and regulations are met.
  • With a paycard, there are no monthly fees, minimum balances, or bank charges incurred, and more often than not, only a small fee is charged for handling certain transactions.
  • Paycards are ideal for certain industries, including hospitality and food service. In some instances, paycards have programs that give employees the option to have their tips sent directly to their paycards, along with their wages.
  • Employees can access their money through ATMs; however, they should note that some financial institutions limit the number of monthly transactions or charge a fee for withdrawals.
  • Just like a debit card, merchants who accept them will also accept paycards when handling transactions.
  • With a paycard, there’s no concern over fraudulent or stolen checks.
  • Depending on the vendor, an employee can access financial information, such as viewing their transaction history, making transfers to other accounts, and sometimes accessing account information via a mobile app.
  • Most paycard programs are FDIC insured and/or include fraud protection in case the card is lost or stolen.
  • Similar to debit cards, employees can only spend what they have in their account. There’s no chance of running into debt. As a result, this can help employees enhance their credit rating.

On the employer’s side:

  • Paycards function similarly to direct deposit: you can run payroll remotely, after hours, or during an emergency. You can also make corrections to paychecks and issue employee reimbursements through a paycard, just like with any other form of traditional wage payment.
  • Paying employees via a paycard eliminates the need for paper checks—the labor costs and environmental waste associated with them and running the risk of lost or stolen checks.
  • Issuing paycards saves the time and cost of delivering checks to those employees who opt out of direct deposit. They can receive wages at institutions of their choice by electronic transfer to a payroll card account.
  • Paycards can also be insured by the Federal Deposit Insurance Corporation (FDIC). Many paycard programs include fraud protection, dispute resolution procedures, and purchase protection plans.
  • Paycards are flexible. If an employee has a bank account, an employer can allocate a portion into a paycard and the balance into a bank account.

As an employer, if you run your payroll 100% paperless, you need to establish a strategy. For example:

  • Determine whether your business will mandate paperless payroll enrollment or make it voluntary.
  • Use different communication tools to ensure that your employees are on board with paperless payroll.
  • Obtain input/feedback from your managers so they can reiterate the benefits of paperless payroll and answer employee questions.

If you successfully switch to paperless payroll, you’ll reduce payroll costs, eliminate check-cashing fees, and increase efficiency. Is paperless payroll right for you?