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To Forgive is Divine… Or Is It?

Dealers that were successful in getting loans from the Paycheck Protection Program may find out the highly touted forgiveness may not be as easy to get as originally promoted. Details and requirements for loan forgiveness were released by the Small Business Administration last week.

To qualify for any forgiveness a dealership must have followed the basic rule that a minimum of 75 percent of the forgiveness being requested must have been used for payroll. No exceptions.

It is permissible that up to 25 percent could have been used for either rent, mortgage interest and/or utilities. But there is a critical caveat that could trip you up.

A business can be penalized by a reduction in the amount forgiven if the rules aren’t followed to the letter — specifically, if the dealership did not bring back the same number of employees that were on the payroll before the coronavirus debacle began, a penalty will incur.

If you had 12 employees before Covid-19, but only brought back 6 with your PPP loan funds, you will only get forgiveness of 50 percent of your loan amount.

Basically, the intent of the PPP was, to the dealerships that kept or brought back their entire workforce would go the spoils. Ah, but remember, we’re talking about the government programs here.

First, how do you determine the number of employees? You have a choice: either the number of full-time employees from January 1, 2020 to February 29, or on the payroll from February 15, to June 30 of last year.

But in true government fashion, there are lurking stipulations, like, count only full-time employees brought back during the eight weeks following the date the loan funds were received — again, there will be a penalty if the dealership did not bring back the same number of employees on the payroll before the pandemic.

Ouch. There’s more.

If more than 25 percent of the loan funds have been used for those three aforementioned non-payroll costs, the allowable amount of forgiveness will be reduced to no more than 25 percent. Moreover, if a dealer hasn’t spent the full allowable amount on payroll, the 25 percent will be even further reduced. Hey, where’s my accountant!

There is another reduction calculation that will be triggered if workers were brought back but pay had to be reduced by more than 25 percent from the level just before the pandemic hit.

In many ways, a dealership will be penalized if they can’t bring back some staff. In addition, state actions can impact dealers who — for example in Michigan — were shutd own or limited by shelter in place orders and/or where boating activities were barred for a time.

While the intention of the PPP was good, there are additional problems dealers may face. Clearly, dealers need to seek good counsel to determine whether seeking forgiveness is better than just determining it’s a low interest debt.

On Monday, Treasury Secretary Steven Mnuchin announced the possibility the 8-week limit could be extended to a more usable 24-week window, among other needed improvements.

A bill was introduced last week that would extend the forgiveness period to include the full duration of the crisis, along with several other changes to the PPP — the House is slated to vote on that bill before the end of the month.

While that makes great sense, there’s no guarantee about any extension or positive changes right now.

NMTA Launches Safe Website

A tip of the cap to the Seattle-based Northwest Marine Trade Association on launching a new safe boating website — Open For Boating — as Gov. Jay Inslee has partially reopened outdoor recreation in Washington.

While cheering Inslee’s move, there are restrictions and guidelines boaters need to be aware of, according to NMTA president George Harris. “Open For Boating is aimed at providing boaters with a single location to quickly and easily find up-to-date information on enjoying boating and fishing in this new environment,” he said.

“These are positive and healthy outlets and a welcome relief during these stressful times,” continued Harris. “Northwest boaters are thrilled to be able to put their vessels and rods back in the water and want to do so safely and responsibly. Our Open For Boating will keep them abreast of the status of marinas, marine parks, the Canadian borders and more, all in one place.”

More specifically, the website includes information about:

· Washington State Parks openings

· Washington State Department Fish and Wildlife seasons, closures and restrictions;

· Guidelines for safe boating and fishing during COVID-19

· COVID-19 and boat shopping;

· Social distancing guidelines for boating safely during COVID-19;

· FAQs.

Finally, NMTA is hosting “Seattle Boat Show LIVE,” a series of free online bi-weekly events with local experts that will run through September 1. The first one, with Mark Bunzel and Leonard and Lorena Landon, the editors of the Waggoner Cruising Guide, premiered on May 8 and was attended by more than 500 boating enthusiasts. A recording can and schedule of upcoming events and registration can be found here


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