Comment by eric_b | Hacker News Reader

Comment by eric_b | Hacker News Reader

A lot of people on social media and in the news are complaining about businesses that took the money that didn't "need" it. It's fun to be outraged but I think there's a few things everyone should know:

- First, the forgiveness requirements, while not fully finalized, cap the amount of money a single employee can be paid and have forgiven at ~20k. It's not like people are getting 1M dollar loans they can just pocket individually. There are reporting/documentation requirements in terms of employees on payroll before and after the loan was made, and documentation required to show a history of the salary that you're asking to be forgiven. I'm sure some things will slip through the cracks, but really they did a pretty good job of shoring up loopholes in the short time period they had to devise this thing.

- Second, very high salaries are not 100% forgivable. If you're making 200k, the most you can have forgiven from the PPP loan is the equivalent of a 100k salary during the 8 or 20 week forgiveness period (again, capped at 20k max)

- Third, who's to say what the long term effects of the coronavirus are on the economy? Just because a business doesn't need the money at this moment doesn't mean they won't be wishing they took it six months from now. Should people who got the stimulus checks and didn't need them give them back too? I don't see too many people complaining about that! I still believe we haven't yet seen the true shape of the coming recession, and think there will be much small business pain ahead. Better to have given these businesses a hand now, I think.

- Fourth - you have to use the money more or less on payroll. This was actually a huge sticking point for a lot of restaurants that wanted to use the money on rent. It's not like loan recipients can buy company Ferrari's with the money - it mostly has to be given to employees in the form of payroll.

Overall the PPP was not perfect, but as far as quickly created government programs, I don't think it was that bad. Millions of small businesses got money, the vast majority of whom can actually use it to pay their middle class employees.

If we want to complain about government programs that are enriching the upper class - I think the latest Fed moves are a better place to start.

Say I'm a company and I have 100k in the bank. I take the loan for 100k and the company I own makes 100k and it pays out 100k in salary.

Now I have 200k in the bank where otherwise I would have had 100k. In a sense isn't this going into the owners pocket?

Say you have $100k in the bank and $100k due to staff and landlords in the next two months and then the government shuts you down for those two months. If the government then gives you $100k, you're not getting rich, you're breaking even.

Some companies are definitely up from the program, others are way down, depending on length of shutdown and how hard their industry was hit. But really, the intent of all the government interventions taken together seems to have been to bring everyone back to even. Obviously the speed of the whole thing did open up some areas of abuse though.

I think you're forgetting that this is a loan first, one that you're inherently liable for paying back, until you're qualified for loan forgiveness afterward.

You have to apply for the loan from a lender (typically a major bank, they handled a large percentage of PPP loans), that will approve your loan or not. The process of that - properly - requires providing financial information about your business and its condition.

If you lie about anything during the before screening or after (when seeking forgiveness), you've committed bank fraud.

If you didn't end up needing the loan, you're liable for paying it back. The lender will make a determination on your forgiveness based on the financials you have to present to attempt to qualify.

There's a giant paper trail for all of this related to your taxes (IRS), financial statements, bank accounts and employee salaries.

Again keep in mind this is a loan. You apply for loan forgiveness after the fact and must substantiate that forgiveness; you may or may not be granted that forgiveness.

You will need to be ready to present full financial statements for the year. The fraud will leap right off the page in your scenario (pocketing an amount equal to the total payroll and then seeking forgiveness).

Here are some of the key conditions for the PPP money:

- You have to substantiate your need for the loan. Then if you apply for loan forgiveness you have to demonstrate that you qualify for loan forgiveness, that you meet the requirements. The lender makes a determination on your loan forgiveness.

- It's based on your average monthly payroll cost for 2019. You can receive up to 2.5 times that amount, meant to cover roughly 8-10 weeks.

- It can go to payroll. 60% must go to this. You may not include contractors in this figure. You must maintain 75% of the prior salary levels.

- The remainder can go to a select few things including rent, mortgage interest, utilities.

- It's limited to a 24 week span of time, in which the forgiveness applies.

> If you didn't end up needing the loan, you're liable for paying it back.

I don't believe there is a necessity requirement on the forgiveness, only on the original funding. And the government assumes any company that received less than 2 million in funding meets this requirement.

(from the treasury FAQ) Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request? Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates,20 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.

The forgiveness is not based on need. It’s based on how you used the money. The current application makes no requests for any financials besides proof of where that money went.

Did some businesses end up not needing the money? Yes, sure. But there were weeks of uncertainty and unknown closure times. The effects on the economy are still unknown really. I don’t think anyone should be punished from taking money just in case, and luckily they were able to make it. States are shutting down again, so who knows.

> it pays out 100k in salary.

Then the maximum loan you would have qualified for would have been $20,833 and you'd be able to get about 80% (plus applicable utility/rent/mortgages up to potentially 100%) forgiven.

So, $16-21k of free money with currently unclear tax implications. Nothing to sneeze at but it's nothing insane either.

If you pay out 100k in salary for the year, I meant pay out 100k in salary(to your employees) over the 8 week period.

That’s not a forgiven loan and you would have to pay it back. Let’s not just make up bullshit for the sake of trying to make a point.

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