The rules are designed to work against the notion of accounting games, the veteran CPA said. “I think that by allowing business to qualify for PPP2 on a quarterly basis, borrowers have more chances to qualify, such as if they had a downturn in one quarter, but had a resurgence in subsequent quarters, they could still qualify, reducing the need to cheat,” Pierzynski noted.
Jeff Farrar, executive managing director of Procyon Partners in New York City and Shelton, Conn., offered that the flexibility is useful, but qualifying businesses still have to spend a lot on payroll. “If you’re a business where you don’t have a big payroll, but other fixed costs are your biggest expense, this doesn’t help you there,” he said.
Colin Horsford, founder and a managing partner of Horsford Accounting and Advisory in New York City, said most of his clients will seek a second round of PPP loans and can use the accounting flexibility. Many of those clients are engaged in operations such as restaurants, medical practitioners, hospitality and construction companies, and government contractors.
“I have some pretty large construction company clients whose owners have been funding operations out of their personal bank accounts and personal loans,” Horsford said. “Some of them have government contracts and haven’t been paid since February. Any money that helps them stay afloat and complete projects until they get paid is a good thing.”
He added that some of his restaurant clients are on the verge of closing, while others are thriving from takeout sales.
While bars and restaurants are eligible for 3.5x monthly payroll, what may work against them is that while reported gratuities for tipped employees are included in the amount of the loan, it becomes more difficult to utilize those amounts to qualify for forgiveness if tips go down due to lack of business, Pierzynski said.
“The problem right now is that the SBA has 10 days from enactment of the law to write the regulations, so they haven’t given us any guidance yet on how they will implement it," he said. "As with the first PPP loan program, the law is very broad, and the SBA administratively fills in the blanks when they design the forms and dribbles out guidance in the form of Q&A’s. They are up to 53 questions related to the first PPP round."