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Published May 21, 2020
A weekly look at issues facing Wyoming business owners and entrepreneurs from the Wyoming Small Business Development Center (SBDC) Network, a collection of business assistance programs at the University of Wyoming.
By John Privette, regional director, Wyoming SBDC Network
On May 13, the U.S. Small Business Administration (SBA) issued guidance for small businesses receiving less than $2 million of Paycheck Protection Program (PPP) funding.
The U.S. Treasury, in coordination with the SBA, issued “safe harbor” guidance for borrowers as published in the SBA’s FAQ, Question 46. The SBA FAQ states: “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.”
This safe harbor guidance results from the realization that businesses with PPP loans less than $2 million are “less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans.”
To be considered for PPP loan total forgiveness, at least 75 percent of the loan must be used for payroll expenses. These include salary, wages, commissions, group health insurance, vacation, retirement, and parental, family or medical and sick leave. The other 25 percent can be used for rent, mortgage interest and utilities.
Best practices for borrowers, in preparation for forgiveness consideration, include:
-- Record the PPP loan deposit date and the eight-week period ending date to remind yourself of the time period requirements.
-- Preferably, establish a separate checking account for the PPP loan and keep a detailed record and documentation for forgivable expenses.
-- As a sole proprietor or LLC business, write a check to yourself as evidence of payroll payment weekly. Cash withdrawals or cash transfers to yourself are weak evidence of payroll.
-- To avoid a reduction of total forgiveness and meet the 75 percent payroll requirement, maintain the number of employees, wages and hours. A reduction of forgiveness amount is required if the reduction of wages over the eight-week period is in excess of 25 percent of the total salary or wages of the employee during the period of Jan. 1 through March 31.
This tip represents our understanding of the PPP guidance at this time with the realization that SBA guidance may change. Visit the Wyoming SBDC Network website for additional COVID-19 resources. You also can contact your local business adviser for no-cost, one-on-one COVID-19 business assistance at www.wyomingsbdc.org/covid19.
The Wyoming SBDC Network offers no-cost advising and technical assistance to help Wyoming entrepreneurs think about, launch, grow, reinvent or exit their business. In 2019 alone, the Wyoming SBDC Network helped Wyoming entrepreneurs start 108 new businesses; create or save 3,402 jobs; and bring a capital impact of more than $24 million to the state. The Wyoming SBDC Network is hosted by UW with state funds from the Wyoming Business Council and funded, in part, through a cooperative agreement with the U.S. SBA.
To ask a question, call 1-800-348-5194, email firstname.lastname@example.org, or write 1000 E. University Ave., Dept. 3922, Laramie, WY 82071-3922.