Trump Calls PPP Fix “Easy”

Originally Published : May 18, 2020

Trump Declares PPP Fix “So Easy”
Mnuchin’s Head Explodes!!!

Today, our boys Will Guidara and Sean Feeney, along with other industry bigwigs, threw down in a Restaurant Squaretable with Trump, Mnuchin, Pence, Kudlow, Jared and Scalia.  All the big boys and… Ivanka.  Not one female restaurateur to represent the industry. Zippo. Absolutely shameful.  

After an inordinate but absolutely required amount of platitude porn (“Your’e one of us!” said Sean, “Thank you for your leadership! ” said everyone), the restaurant guys got to it and laid it down.  In a powerful and unified voice, they were laser focused as they hammered away at one issue: FIX THE PPP!!! 

They were so in lockstep that Trump asked if they had all met before the meeting because they were all saying the same thing.  The big ask was to extend the time period to use the PPP funds from 8 weeks to 24 weeks. At one point Mnooch stammered something about them working on it and technical fixes and bipartisan support  until  Trump looked at Mnooch and said  extending the timeline “…should be easy.  It’s one of the easiest requests I have heard!”.  The room erupted in laughter.  Nervous laughter?  Laughs of relief?  Garden variety obsequiousness? Who knows? But it’s on the record now so a big kudos to all the hard-working and disciplined men who traveled to D.C. today to bring the message directly to the White House.  It was a lesson in true leadership and we applaud them all.  You can watch the meeting here.  It starts around 1:17 :

Trump was also was quite enamored with the idea of reinstating deductions for meals in restaurants and limiting liability on COVID claims.  I mean, he talked about it over and over. So, we will keep our eyes on those issues as well.

Lots of PPP news today.  Here is Joseph to report about the forgiveness application that was released this weekend.  

Joey Regs Says:

OK, finally!  The SBA has, at long last, released the PPP Loan Forgiveness Application.  Borrowers rejoice…sort of.  It answers some questions definitively; it avoids some entirely; and casts a whole new net of shit onto the whole process.  And of course they dropped 3 weeks late and on a Friday night, with no advance notice.  Might as well ensure that no one can enjoy the nice weather this weekend.  Instead, we were confined to a “Beautiful Mind” like scenario in our dimly-lit rooms, surrounded by mathematical equations and illegible scribbling-or maybe that was only me.  Anyway, while it does give us some clarity in a number of key areas, the SBA has, yet again, raised far more questions than it has answered. Here’s a quick rundown of what we now know.
The 75% Rule. The forgiveness application now makes clear that the 75% threshold test applies to the loan forgiveness amountThis means that you CAN apply for “partial” forgiveness, but you will only be able to have that amount fully forgiven if the totals fall within the dreaded 75/25 ratio.  This is a departure from the prior interpretation, which suggested that there is no partial forgiveness, if you fail to hit the 75% payroll threshold within the allotted 8-week period.

As a reminder, though, irrespective of whether you plan to apply for PPP loan forgiveness, 75% of your total loan amount MUST still be spent on payroll costs at some point during the lifetime of the loan; no more than 25% of your PPP loan can be spent on rent, utilities, and mortgage interest.
FTE Calculations. The CARES Act was technically silent on this one, but the SBA has now announced that FTE should be calculated 40 hours/week, as opposed to 30 hours/week. The good news? This means that the FTE totals during your look-back period(s) will likely be lower than you had initially planned. The not-so-great news? This means that your employees will need to be scheduled to work at least 40 hours/week during your 8-week window to count as 1.0 FTE.
The SBA may have thrown us a bit of a bone, here though, by allowing you to use a “simplified” calculation, if it suits you: an employee who hits 40 hours/week would count as 1.0 FTE, but employees who work anything less than that 40-hour threshold can simply be counted as .5 FTE (as opposed to the exact fraction proportionate to an employee’s weekly hours).  This will require a little math, but could be beneficial.
FTE Reduction Exemptions. You will NOT be penalized for a reduction in FTE if the reduction was a result of any of the following circumstances: (1) an employee rejects your good-faith, written offer of rehire, (2) an employee is fired for cause or voluntarily resigns during the 8-week period, and/or (3) an employee voluntarily requests a reduction of pay/hours. This last point, in particular, will likely be hugely beneficial, as we know many of you are facing the uphill battle of rehiring employees who are insisting on part-time schedules that allow for them to continue collecting partial unemployment.  This is a departure from prior guidance, which only allowed for exemption #1 above.
Salary Thresholds. We’d been wrestling with whether we should use an employee’s gross earnings during Q4 2019 or Q1 2020 to determine how much they needed to be paid – but the SBA has finally given us a concrete answer on this one! Employee salaries during your 8-week spending window should be based on gross earnings from January 1, 2020 through March 31, 2020.
8-Week Total Gross. It’s now also clear that an employee’s total take-home during the 8-week period is what the SBA will be reviewing – not weekly compensation. In other words, an employee’s cash compensation is capped at $15,385, irrespective of whether that was paid out in weekly installments or not.
Flexible Payroll Cycles. You’re now able to choose to use an alternative, 8-week period that corresponds with your normal payroll cycles. For example, if you received your PPP loan proceeds on Friday, May 1, but your regular pay period starts on a Sunday, your alternative payroll covered period can run from Sunday, May 3 to Saturday, June 27 (instead of May 1 – June 25). 
Flexible Billing Cycles. Similarly, rent and utility payments that are paid after the 8-week covered period, but before the next regular billing date, are covered, as long as the costs accrue within your 8-week spending window.  

Covered Rent Obligations. The SBA has now included lease agreements for personal property when discussing rent obligations. First time this has been included. Could this mean that you could pay equipment leases with your PPP loan proceeds? Unclear, but hoping this is one of many more things the SBA will shed light on eventually.
Paid and Accrued. The forgiveness application lends more credence to the assumption that only costs that are paid and accrued during the 8-week period will be forgiven. In other words, you still likely cannot pay rent or payroll costs that become due before or after the 8-week covered period.
Guaranteed Payments. Weeks ago, the SBA clarified that guaranteed payments to owner-employees were covered as payroll costs, subject to the $100k cap on an annualized rate. Now, however, the SBA is imposing a new and quite frankly fucked-up restriction: for any owner-employee, their PPP compensation cannot exceed 8 weeks’ worth of 2019 compensation. This begs some questions that, unfortunately, do not yet have answers:Do profit distributions or dividends paid to owners count as ‘compensation’?What if the business was not operating for the entirety of 2019?What about owners who have already begun to pay themselves using PPP funds in reliance of past SBA guidance, who may not be eligible now to receive PPP compensation based on this new guidance?See what we’re saying?  They threw us a few bones, but then also took some big ones away.  There’s a lot to unpack here.  So much actually, that we’ve decided that we must do another webinar on these new developments tomorrow!  So many questions can now be answered, but so many more have arisen.  We’re taking a deep dive tomorrow.  Details on the webinar below:

PPP Webinar
Tuesday, May 19, 12:00PM
Register here:

In the words of Joni Mitchell: “You’ve got to shake your fists at lightning now, you’ve got to roar like forest fire.”

Thanks again to Sean and Will for shaking and roaring today.
Good Night,