The PPP and Me

by Vaishali Khunti, Director of Operations, ADPP Enterprises

A gas station operator’s personal experience with the Payroll Protection Program

At close to a 35 percent sales loss and with no employees ready to work, being an essential business was hard even though we were technically able to open. We were hiring without much scrutinizing. Virtually anybody of age could work in our convenience stores and gas stations as long as the employees were legally authorized to work in the U.S.

Close to 50 percent of our existing workforce had left due to fears of COVID-19, but we reopened in no time with an almost entirely new crew. Luckily, we applied for the U.S. Small Business Administration (SBA) Payroll Protection Program and Emergency Injury Disaster Loan in the same week they were announced.

I did the best I could while working from home, but our bank was overworked, we still missed its first cutoff date, and SBA funds were quickly exhausted. If Congress did not replenish the funds in its second wave of funding, we would have been struggling operationally. Thankfully, I was able to report acceptance and approval of Payroll Protection Program (PPP) funds in the second phase, and operations began running more smoothly. Our Emergency Injury Disaster Loan (EIDL) application was also approved soon after.

From my perspective, SBA did the best they could for employees as well as businesses. Our funds were used to the best spirit of the programs, and we kept hiring to support our operations. Still, we received many unemployment claims. Even after providing personal protective equipment, many former employees feared exposure and chose to go to the government for financial support rather than return to work.

Businesses like ours were attracted to the SBA for its low interest rates and flexible payment terms, and we were excited to learn that some of the PPP funding can be forgiven. While studying interim rules, I found significant leeway in four changes to the loan program:

1. Funds’ use time increased from eight to 24 weeks;
2. Payroll funds’ usage percentage lowered from 75 to 60 percent;
3. Loan repayment period increased from two to five years; and
4. Businesses whose loans are eligible for forgiveness can defer payroll tax payments.

Banks have started to pre-register businesses for PPP forgiveness, and a PPP loan forgiveness form became available on June 16, 2020 with an expiration date of October 31, 2020 (Editor’s Note: This application can be found in the NEFI Financial Resources Center at nefi.com/financial-resources-center).

As this article went to print, our business still had many questions regarding loan forgiveness.

Which exact expenses are deductible for tax purposes? What are some of the state tax implications businesses will face on forgiven funds? Is any more expansion expected to the kinds of funds that are eligible for forgiveness? How does the December 31, 2020 rehire date impact the borrowers who want to apply for forgiveness prior to that date? When will new guidance be available from SBA and/or Treasury and/or banks? Are owners of multiple entities allowed to have more than one loan forgiven? Will there be any more revisions to the application?

What is clear is what all the borrowers can do: EIDL funds can and will be deducted from PPP loan forgiveness; we can definitely spend 60-100 percent of our PPP loan on payroll; we can apply for forgiveness before 24 weeks are up; we can also apply for and receive state grants, additional loans, EIDL and PPP loans (if we haven’t already done so); and we can surely expect additional changes to the rules for administering EIDL and PPP loans.

What borrowers cannot do is: use line of credit interest as forgivable expenses; use liability insurance/workers’ compensation costs as forgivable expenses; apply for additional PPP funding if you already received it once; receive pending funding after June 30, 2020; or spend more than 40 percent of the loan on non-payroll costs. As this article goes to publication, we also cannot submit a loan forgiveness application, because banks are not yet accepting them.

Vaishali Khunti is the director of operations at ADPP Enterprises, Inc., a privately owned company that operates gasoline and diesel retail businesses, convenience stores, service stations, car washes, fast-food franchises and truck stops throughout New Jersey and Pennsylvania. She currently sits on a Working Committee of the BP Amoco Marketers Association’s National Leadership Board.

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