July 23, 2020
We have not done any payroll reductions so far but are now contemplating a possible reduction through year-end. Even with this reduction, our payroll over the 24-week period will far exceed the loan amount. Is there anything else we need to review to make sure we still maximize the forgiveness percentage?
Posted by Armanino Financial Advisory Team
Your payroll costs over 24 weeks may exceed your loan amount, but that does not preclude you from being affected by the FTE Reduction Factor. Keep in mind that total payroll costs over the 24-week Covered Period can only exceed the loan amount if you paid for the excess portion yourself and did not use PPP money to do so (since you’d already exhausted the PPP funds). The government is not asking how you spent your own money, only how you spent theirs. You can’t get forgiveness for spending your own money, nice as that would be. So, assuming you do these contemplated reductions during your 24-week Covered Period — which means prior to September 17, 2020 for any borrower who was funded the day the PPP program opened (April 3, 2020), or later than that if funded after April 3, your forgiveness amount will be subject to being reduced based on a lower number of FTEs compared to your chosen baseline period.