These payroll and expense payments
must be incurred during the covered period and are subject to certain quali- fications, both of which we’ll discuss, to be considered for forgiveness.
2. The covered period is extended. The PPP originally required that the funds received be spent within 8 weeks of receipt. The covered period may now be extended from 8 weeks to 24 weeks or December 31, 2020, whichever occurs first. In other words, you now have more time to spend the money and qualify for forgiveness. This change is beneficial to all florists who reduced their employee count between February 15 and April 26. This most likely means everyone. However, if for some reason you did not reduce your employee count during that period, this change may or may not be beneficial. (See the following.) This change in the covered period
is not mandatory. Each business has the right to either stick with the original 8-week period or change to the new 24-week period. If you were able to spend all your borrowed money within 8 weeks, it is probably most beneficial to stick with that original option. The 8-week option is only available to busi- nesses that applied and received their funds prior to June 5, 2020, when the PPP Flexibility Act was passed.
3. Deadline extended to “eliminate” employee reduction. June 30 was the original deadline by which a business was required to rehire enough people to match the average number of Full Time Equivalent employ- ees they had during a chosen reference period: Feb, 15, 2019-June 30, 2019 or Jan. 1, 2020-Feb. 29, 2020. A Full Time Equivalent employee is comprised of one or more employees, whose combined hours equal 40. In other words, two 20- hour employees would equal one FTE. The new deadline is December 31
or the date on which you file for for- giveness, whichever is earlier. Note that “eliminate” means you have until the deadline to bring your FTE count back up to the February 15, 2020 level. One last day of this FTE count qualifies. (In other words if you lowered your FTE count
down by 20 percent and then, on the last day of your covered period, you raise it back up to your normal level, you would be fine.) However, not everyone will qualify for this “elimination” provision. In order to qualify for this provision,
you must have reduced your FTE head- count between February 15 and April 26. This is called the “Safe Harbor rule.” Any business that did not reduce their FTE count between February 15 and April 26 does not qualify for this “elimination” provision. They must show that the average FTE count during the entire 8- or 24-week covered period was equal to the February 15, 2020 level. This is one reason why a business
might want to stick with the original 8-week period. If they did not qualify for the Safe Harbor rule, the amount of time they would need to keep the FTE level equal to the February 15 level would only be 8 weeks rather than 24. Once the 8 weeks are up, they could reduce their FTE number without jeopardizing for- giveness. Remember, this exception only applies to businesses that did not reduce their FTE between February 15 and April 26. I would be surprised if any florist did not reduce their FTE headcount during that time. So, this exception is probably not applicable to most florists. If you did not get your FTE headcount
back up to the February 15 level, your loan forgiveness would be prorated propor- tionately. In other words, if you got your FTE headcount back up to 75 percent of the February 15 level, you could only get a 75 percent forgiveness of your PPP loan.
4. Deadline extended to “restore” reduced pay rates. June 30 was the original deadline to “restore” pay rates to their February 15 level. It is now extended to December 31 or the date on which you apply for loan forgiveness, whichever comes earlier. The first and most important point of distinction is that a reduction in hours is not equal to a reduction in the pay rate. A reduction in hours is a reduction of your FTE headcount. A reduction in pay rate means you lowered the hourly rate or the employee’s salary. Again, there is a Safe Harbor rule
to qualify for forgiveness by merely “restoring” pay rates. It is like the earlier FTE Safe Harbor. If you reduced pay
rate between February 15 and April 26, all you have to do to get full forgiveness is to “restore” pay rate to at least 75 percent of the February 15 pay rates by December 31 or the date you apply for forgiveness, whichever is earlier. However, if you did not reduce pay rates during that Safe Harbor period, you must show that the “average” pay rates since getting your loan are at least 75 percent of your February 15 pay rates. If you didn’t qualify for this Safe
Harbor, you might not want to opt for the 24-week period because the 8-week period shortens the time you have to keep average pay rates at 75 percent of your February 15 pay rate level. Again, most, if not all, florists do not have to worry about this option since they most likely would have made any rate reduc- tions between February 15 and April 26.
PPP Loan Forgiveness Process There are two options for your forgive- ness application: 1. The original forgiveness application packet is 10 pages and has four parts. It is quite detailed, so it would be wise to involve your CPA and PPP lender when filling out the forms accurately.
2. The new 3508EZ form. This form is much easier to fill out and doesn’t require nearly the same amount of detail. It is my understanding that the SBA expects the majority (maybe 80 percent or more) of PPP recipients to use the 3508EZ form. This form is certainly where you should start and most likely you won’t have to even consider the longer, more complicated, form.
The PPP under the original CARES Act
and now modified by the PPP Flexibility Act is a wonderful financial aid to the retail florist. However, as with all government programs, you need to read the small print and make sure you fill out and submit the forms properly and on a timely basis.
Paul Goodman, MBA, PFCI, is a former CPA and the founder of Floral Finance Business Services based in Tulsa, Oklahoma, editor of Floral Finance and author of The Profit-Minded Florist.
plgoodman@aol.com
The magazine of the Society of American Florists (SAF) 37
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