More money, more questions.
Many details of the soon to be replenished Paycheck Protection Program remain elusive for small-business owners, both those who are waiting on loans and those who have received PPP funds. Some of the confusing issues related to PPP loans involve unemployment benefits, according to Sarah Jennings, a director at accounting firm Maner Costerisan. "It's a really tricky situation," Jennings said during the National Small Business Town Hall, a live webinar featuring a panel of small-business experts hosted by Inc. and the Chamber of Commerce, on Friday, April 24.
Here are five things every business owner should know about PPP loans and unemployment.
1. You can't double-dip if you're self-employed.
While self-employed workers and anyone who gets paid using IRS form 1099 are eligible for both PPP loans and unemployment benefits, you can't receive both. If you apply for unemployment and the PPP program and receive a PPP loan, you must then withdraw from unemployment. "Just try to eliminate double-dipping," Jennings said.
2. You can hire new workers.
Some business owners whose workers are now receiving unemployment benefits are finding it hard to rehire them after receiving a PPP loan. If your former employees aren't able to return to work for any reason, you can hire new workers without jeopardizing the portion of your PPP loan that will be forgivable. "The statute doesn't care if it's Sally or Joe," Jennings said. She added that business owners should focus on the payroll funding they need for the full-time equivalent (FTE) that makes sense for their business right now.
3. You can offer hazard pay.
If your employees are concerned about returning to work because of risks related to the coronavirus, you can offer them a hazard pay bonus or other bonuses. This additional compensation can still be part of your PPP loan that gets forgiven. "It is normal payroll," Jennings said, adding that she would "be careful" about giving an extremely large bonus. "I think there will be some scrutiny on how big those bonuses are gonna be in the end."
4. Don't game the system.
If your plan is to use your PPP loan to overpay your employees for eight weeks and then stop paying them, don't. "That is abusing the system," said panelist Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce. "You're going to get caught on that, and that's how you get in trouble in this situation."
5. Consider the unforgivable loan amount.
If some of your employees are receiving unemployment while others are still working, you may end up with significant PPP funds that you can't allocate to payroll. Rather than returning that money, you should consider keeping it, given the 1 percent interest rate and other generous terms, according to Eugene Cornelius, senior director at the Milken Institute's Center for Regional Economics and California Center. "If you're willing to pay the interest and you're willing to deal with the duration of the loan outside of forgiveness, you need to take that into consideration," Cornelius said.