Gauging Trust in Your Work Relationships

How do you gauge the strength of the working relationships you have with your fellow colleagues, your subordinates, and your boss? 

When I gauge the strength of my relationships, it all comes down to trust.  The trust I have in others and the trust they have in me.  If a high level of trust exists in our relationship, then I will seek out opportunities to work with you and our work together falls naturally and comfortably into a synchronized productive rhythm.  We exchange thoughts and ideas, challenge each other and collaboratively develop solutions.  All of our collective energy goes into the work, not the relationship. 

But if trust doesn’t exist, it’s a completely different story.  Initially I will continuously drag my feet to work with you, and I’ll begin to find ways to guard and protect myself.  I’ll spend significant amounts of energy questioning your interests, desires and motives rather than directing my energy into the assignment we need to tackle.

My approach and the productivity difference is discerning.

According to Stephen Covey, “trust is the foundation of everything we do and the key leadership competency of the new global economy.”  I truly couldn’t agree more. 

So why then is so little time invested on trust in our workplace?  No framework, no vocabulary.  No practical and understandable way to assess it, build it, maintain it, and most importantly repair it when it’s damaged.  After all, all relationships are imperfect. 

Most people (myself included) can’t articulate how strong trust gets built in some relationships and not in others.  Attempted explanations are nothing more than a historical collection of successes or transgressions that lead to our verdict. 

Building trust is critically important. 

We all need a framework and vocabulary to guide our discussions with those we work, and when I went looking for one, that’s when I read Charlees Feltman’s book. Charles is the author of The Thin Book of Trust.  The Thin Book of Trust was just what I was looking for – a simple framework of rich practical content in 64 concise pages. 

Stephen Covey’s book The Speed of Trust, while excellent too, is roughly 365 pages long. 

According to Charles book there are four primary components of trust:

  • Sincerity – I mean what I say, say what I mean, and act accordingly.
  • Reliability – I meet my commitments and you can count on me to deliver what I say.
  • Competence – I have the ability to do what is being proposed. I have the requisite capacity, skill, knowledge and resources.
  • Care – I have your interests in mind when I make decisions or take actions. 

These four components create a common language for openly discussing trust – the trust you have in others and they have in you.  If all four components exist, then that relationship would be mutually regarded as a high value trust relationship.  And when discussing mistrust, these four components allow you to be specific about why trust doesn’t exist.  That specificity is valuable to the other person because it will guide them on how to rebuild trust with you, and vice versa.

Having a common vocabulary about such an important topic in the workplace is invaluable.  It brings the topic of trust out into the open.  And candid and open dialogue is trust-building in itself. 

So if you’re struggling with trust in your work relationships I highly suggest hitting Amazon and picking up a copy of the book. If you are the leader of an organization that has trust issues and can benefit from a training session please reach out to us. At MCDA CCG, Inc. we can tailor a fun and interactive training session to bring out the best in your team and get trust up to the top of the priority list. We offer training both on-site and online. Contact us today at (714) 872-2393 or directly at

Securing Your Business and Protecting Your Assets During Covid-19

In the face of uncertainty, successful business leaders must prioritize key business essentials and skillfully guide their organizations through this global crisis. MCDA CCG, Inc. has developed a checklist of 11 critical areas for financial executives to focus on now to position their organizations for a strong recovery.

  1. Cash management strategies
    1. Prioritize and conserve cash payments by creating a deferral strategy
  2. Finance & liquidity
    1. Re-cast cash projections
      1. Prioritize and re-cast business initiatives
      2. Assess and adjust for potential supply chain shortages and price changes
  3. Working capital management to aggressively free up cash
    1. Accelerate collection activity
    2. Strengthen credit policies and procedures
    3. Re-balance inventory levels to reflect revised forecast and demand
    4. Maximize return on limited inventory
    5. Review of key essential and non-essential vendors and payment terms
    6. Update reserves and valuation of A/R and inventory
  4. Banking relationships and debt
    1. Identify opportunities to immediately defer payments and reporting dates
    2. Renegotiate existing bank lines, terms and covenants
    3. Identify capital availability outside of traditional sources
    4. CARES Act – SBA 7(a) loan
  5. Lease obligations
    1. Accelerate collection activity
    2. Identify opportunities to immediately defer payments
    3. Renegotiate lease terms including extensions
    4. Reassess accounting for leases
  6. Going Concern
    1. Reassess accounting disclosures including going concern analysis
  7. Valuation, impairment and restructuring
    1. Review of intangible and long-lived assets for impairment
    2. Assess accounting for restructuring activities
  8. Insurance and legal
    1. Examine business interruption insurance
    2. Assess coverages to reflect changes in business
    3. Assess Force Majeure exposures
    4. Analyze new unintended risks, exposures and liabilities
    5. Update crisis recovery and business continuity plan and teams
  9. Tax advisory
    1. Reassess effective tax rates
    2. Examine new filing deadlines
    3. Understand new NOL carryback rulings
    4. Understand new valuation allowance assessment
    5. CARES Act modifies loss limitation for pass-through entities
  10. Workforce management
    1. Right size employee headcount
    2. Essential business categorization
    3. Assessing impacts of new sick leave and PTO rulings
    4. Notify employees of new retirement plan flexibility
    5. Identify technology needs and security exposure points to reflect remote workforce
    6. Reassess processes and internal controls surrounding changes in workforce functions and remote environment including fraud risk
    7. Understand impacts of CARES Act on employee base
      1. Expansion of unemployment insurance
      2. Recovery rebates to individuals
      3. Employee retention credit
      4. Deferred employer share of payroll taxes
  11. Mergers & acquisitions
    1. Reassess in-process M&A activity – accelerate or postpone
    2. Integrations – accelerate or postpone
    3. Identify opportunistic transactions
    4. Evaluate the potential to accelerate divestments

MCDA is Here to Help! To assist businesses and business leaders during these tough times we are offering free consultations and discounts on our services.

MCDA CCG, Inc. can help you evaluate these critical business areas and determine which require immediate focus. If you would like advice or assistance regarding these recommendations, please contact Mike Rash at or call 714-872-2393.

5 Steps for Professionally Turning Down a Job Offer

Some jobs aren’t the right fit and, before the interview process, it isn’t always easy to tell. Remember to always research the company and its executive leadership team before the interview process. Whether you have multiple job offers on the table and need to turn one down in favor of another or you simply feel the job won’t be the right fit for you, follow these 5 steps to turn down a job offer professionally and skillfully.

1. Thank Them for Their Time: While you should have sent a thank you letter after each interview to the hiring managers and other potential employers involved to thank them for the time they spent interviewing you, it never hurts to reiterate that before turning down the job offer. This will keep everything polite and professional and they’ll remember your gratitude in future interactions.

2. After Much Thought and Careful Consideration: Before you express you’re going to turn down the offer, you need to let them know that you’ve put a lot of time and thought into your decision. This will make the decision seem more finite and concrete, and it will also give them an indication of your intention to turn down the job offer. Before explaining your reason for turning down the position, start your sentence with “after much thought” or “after careful consideration”.

3. Give a Solid, Brief Reason: While you don’t want to leave a hiring manager completely in the dark about why you’re turning down the offer, you also don’t need to go into excruciating detail. The best thing to do is to be brief and give one or two solid reasons why you’ve come to the decision you have.

4. Your Career Goals and Their Bright Future: It’s important to communicate why you’re turning down the offer but, if you can’t think of a specific reason that you’d want to share, simply let them know that the position isn’t the right fit for your career goals at this time. Wish them well and say, “good luck in finding someone who is the right fit for this position. I’m sure they’ll have a bright future at your organization.”

5. Stay in Touch: If you’re going to be working in a small industry or want to potentially work for this company in the future, it’s a good idea to find a way to stay in touch. Share your contact information and wish them all the best in the future. If you run into each other at a networking event, conference, or just while you’re out on the town this will leave things off on a positive note and expand your professional network.

Not every job offer is the right fit for you so sometimes you have to turn it down. If you’re doing this on your own, these 5 steps will help you do it gracefully and professionally. Of course, if you had the help of a talented search executive (Wink wink) they could guide you through this process and take some of the burden off of your shoulders! Contact us at MCDA CCG, Inc today if we can be of assistance!

Dynamic Recruiter Wanted!

About the Recruiter position:

We are looking for a dynamic Recruiter with full-cycle recruiting experience from talent sourcing and attracting candidates to interviewing and hiring. A successful recruiter will collaborate with site managers on a regular basis and proactively identify future hiring needs. You should also be able to attract candidates using various sources, like social media networks and employee referrals. Our ideal recruiter holds an academic HR background combined with work experience in screening, interviewing and assessing candidates. Ultimately, the responsibilities of the Recruiter is to ensure our company attracts, hires and retains the best employees, while growing a strong talent pipeline.

Recruiter Position responsibilities are:

• Creating new recruiting strategies

• Creating and modifying new job descriptions

• Creating and maintaining recruitment documents

• Posting jobs on various channels and participating in job fairs

• Screening of backgrounds

• Conducting interviews and coordinating follow up with hiring managers

• Promoting the company on a wide basis

• Conduct employee orientations Recruiter requirements are:

• Minimum of 5 years experience as a full life cycle Recruiter

• Familiarity with laws, regulations, and best practices applicable to hiring and recruitment.

• Excellent analytical skills

• Familiar with HR databases and applicant tracking systems

• Familiar with MS Office software

• Great problem-solving skills

• Effective communication skills

• BA/BS degree in Business, Human Resources desired or equivalent work experience

• PHR/SHRM-CP preferred

Competitive compensation package!

Send resumes in PDF format to – Urgently hiring!

EIDL Assistance

Update as of 16 – June – 2020- THE EIDL ADVANCE IS OPEN TO ALL APPLICANTS! (Many of our clients are currently seeing approvals within 24-48 hours at this time!)

MCDA is submitting and can provide same-day confirmation numbers for the Economic Injury Disaster Loan (“EIDL”) & Grant Program. We have successfully provided funding for hundreds of our clients so far in round 2 of the COVID-19 Government Stimulus Plan for the EIDL. Our team is providing support around the clock while government funds are still available. Should you wish to apply and take advantage of both of these fully forgivable programs, it is imperative that you contact us as soon as possible.  

US Small Business Administration PPP / EIDL Data as of June 15, 2020

(1) The Economic Injury Disaster Loan Advance (“EIDL”) Summary

  • Advances Disbursed:                            3.245M at a total dollar amount of $10.71B (Approx. $9.29B Remaining)
  • Nationwide EIDL Loans Approved:     1.333M at a total dollar amount of $90.93B

EIDL Advance & Loan Next Steps:

  • If you have not yet applied: CONTACT US ASAP!
  • If you have applied and require further assistance or would like help with the loan portion after receiving your advance, please contact us by calling 714-872-2393
  • Full-forgivable advance up to $10K
  • In addition to the advance, The EIDL can provide up to $2M of financial assistance in the form of a loan with no fees and terms based on your financial ability to repay the loan. 

Empowerment is the key to successful process improvement

Sustainable change management only occurs when you have an empowered organization. An empowered organization occurs when you have empowered and engaged human capital assets. To take and carry the thought forward, if you have engaged and empowered human capital assets they will carry that sense to their cross-functional team roles.

An empowered team seeking organizational teams must ensure that they are encompassing three factors – diversity of ideas and makeup, utilization of new tools, and moving to new decision making solutions.

Diversity of ideas must mean that we are open to views of our problems that do not meet the usual suspects or ways to do things. Diversity of makeups means that we are open to the input from sources both inside and outside our organizations. It means that must be open to the inclusion of individuals that we do not normally give a voice to when resolving issues. It means recognizing who are the true subject matter experts with in the organization.

The final tool is the determination of the solution menu to resolve the issue at hand. All too often we rush to judgement as to a solution. It comes from the use of the first idea that comes to mind. It comes from a view that this is what we should do. Francesca Gino, in her article for the Harvard Business Press, suggests that the right question to ask is not what we should do but rather what could we do. Changing the focus from should to could do opens the discussion to more creative suggestions for applicable solutions. Especially as we discussed above that part of the success of the empowered team is collaboration. So if you go out to the wide range of ideas the could do mode allows for more inclusion of the diversity of ideas on the market 

Empowerment is the key component to successful process improvement and sustainable change management. It is not easy but it is necessary to bring about innovation in the current and future workplace environments.

President Trump Signs Bill Easing PPP Requirements

President Donald Trump has signed into law a bill that gives employers more flexibility when using Paycheck Protection Program (PPP) funds and applying for loan forgiveness. 

Current PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. New PPP borrowers will have a 24-week covered period, but the covered period can’t extend beyond Dec. 31, 2020. 

Under the language in the House bill, the payroll expenditure requirement drops to 60% from 75% but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven.

Payroll costs include:

  • Salary, wages, commissions and tips—up to $100,000 annualized for each employee.
  • Employee benefits, including paid leave, severance pay, insurance premiums and retirement benefit.
  • State and local taxes assessed on pay.
  • Payroll costs for sole proprietors and independent contractors include wages, commissions, income or net earnings from self-employment (up to $100,000 annualized).

The additional 40 percent could be spent on mortgage interest, rent, utilities and other costs. 

Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.

The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.

New borrowers now have five years to repay the loan instead of two. Existing PPP loans can be extended up to 5 years if the lender and borrower agree. The interest rate remains at 1%.If you have any questions regarding this or any other HR related matter, please feel free to call us here at MCDA CCG, Inc.


Job Description/Role Overview:

The Lead HR Consultant will work closely with people leaders across all functions and spanning a defined set of geographies in providing and implementing HR support aligned to the corporate HR policies and processes at a country and cluster level in line with the agreed ways of working. The role will be responsible for providing advice, support and coaching to managers and employees across the full range of employment policies, including areas such as people performance management issues, employee development, career, performance capabilities. The role will provide advice and support to the HR Business Partners in relation to projects linked to organizational design, M&A activity, restructuring, development and change activities, as well as HR COE cyclical activities and programs (e.g. salary review, performance reviews, workforce planning). The role will also provide support to COEs and HR Business Partners to rollout critical programs and initiatives at local level. The role will also focus on both individual and collective relationships in the workplace. It supports and coaches people managers to establish trust-based relationships with employees and to manage employee relations issues. Working with the wider team, the role will support the drive for continuous improvement that delivers year on year cost savings and service capability, whilst improving service performance against benchmarks. Responsibilities:

Performance and Customer Focus – 35%

• Evaluate developments in local country employment legislation, HR policies and practices in other organizations and make proposals on how they might be applied within S&N to improve service delivery.

• Responsible for ensuring compliance with country and local HR laws and regulations and partner with legal to stay abreast of changes and ensure all compliance requirements are met

• Together with Business Partners, COEs and wider HR Consultancy team, review the application of employment policies and inform the development of employment policies as appropriate.

• Ensure all changes in employment legislation and policy are communicated to the relevant HR Services team and the business and all working practices / communications are aligned to the new policies and embedded in the HR technologies.

• Provide responsive and high quality, support, coaching and advice to all parts of the organization, including senior managers to ensure the appropriate management of all employee relations/performance issues including in particular grievances, poor performance, absence and disciplinary action.

• Ensure all employee relations/performance cases are managed in a timely / professional manner through to resolution, minimising the cost to the organization.

• Plan and provide responsive and high-quality site based or country-based service in the delivery of individual consultations as part of TUPE/M&A activities.

• Provide an independent and professional mediation service within the local or cluster team

• Provides support to COEs and HR Business Partners to rollout critical programs and initiatives at local level, such as local language translation reviews, and conducting general/information session (webinar) in local languages working closely with the COE’s, HR Services and other areas of HR.

• Working with HR Business Partners, contribute to the continued improvement of the health of the organization by monitoring and analysing performance indicators, such as sickness absence, levels of grievances and disciplinaries and work/life balance, and developing initiatives and solutions to enable positive trends.

• Participates in and provides data for audit reports, HSE or any governmental reporting requirement.

Coaching for Managers – 25%

• Coach and influence management on the application of S&N employment policies, ensuring legal and policy interpretations are constantly integrated into capability and team knowledge.

• Working across the wider team and with Business Partners, improve efficiency and effectiveness in the management of attendance, performance and employee relations/performance, by using management information effectively to drive proactive interventions to support the performance and skills development of line managers. In conjunction with Learning Services and Business Partners, ensure training plans and tools are developed to meet these needs.

• Provides stewardship of the organization’s culture and cultural pillars to facilitate success.

• Coaches leaders on the link between behaviours and culture. Weaves cultural standards into HR practices, processes and ways of working.

• Communicates the culture broadly and frames it in ways that engages employees.

• Puts into place systems and practices that aligns individual behaviour and organizational goals at all levels.

Driving Continuous Improvement – 20%

• Act as a champion for internal customer focus and listen to and communicate with internal customers and stakeholders effectively; ensuring that procedures and systems are in place to inform and receive feedback from partners, stakeholders and employees, and evaluating that feedback, taking appropriate action to secure continuous improvement.

• Contribute to the development and improvement of the HR Consultancy model and case management system to meet business needs and to enable prioritisation and risk assessment.

• Input to new policies, policy guides, process maps and ServiceNow to support the introduction of the new employment policies.

• Ensure classifications and tasks created in ServiceNow support the MI requirements of the business for employment policies.

• Identify and implement new initiatives that will enhance the quality of advice given by the HR Consultancy function.

• Proactively seek input from customers to ensure delivery meets business needs, and propose changes to level of services provided

Relationship Management – 20%

• Working closely with people leaders across all functions and spanning a defined set of geographies, ensure good understanding of S&N business needs and objectives to provide and implement HR support aligned to the corporate HR policies and processes at country, cluster and regional level in line with the agreed ways of working.

• Ensure the presentation of employee relations/performance proposals clearly articulates the business outcome and objectives for any employee relations/performance intervention.

Education: Bachelor’s Degree or related experience

Licenses/ Certifications: HRCI and/or SHRM certification preferred


• Good working knowledge of employment laws and practices required linked to a particular region or country.

• Previous HR experience working at a generalist level. Ideally, experience at operating in a Shared Services HR model.

• Experience with Workday and other HR People Management systems. Strong MS Office software experience required. Skill in database management and record keeping. Strong analytical capability with respect to problem solving, conflict resolution and employee relations matters.

• Excellent communication, interpersonal skills required. Must be innovative and proactive in a fast-paced environment with a willingness to adapt. Demonstrates integrity in all business interactions.

• Relevant language capability and cultural awareness dependent on region or country.

• Demonstrated ability to coach managers and to deliver on project commitments Competences:

• Substantial Business acumen/Knows the business. Understands the business and can translate strategy into clear action plans. Uses insight of the business environment to improve business outcomes

• HR Expertise and Intelligence/Analytical skills:

A solid background in HR having good knowledge of HR practices and procedures. Ability to collect and synthesize large quantities of quantitative and qualitative data, recognizing trends and develop recommendations based on analysis. Applies experience in order to resolve complex problems and decides on courses of action.

• Initiative: Able to work independently and receives minimal guidance from leadership, able to reach agreements and consensus despite differing priorities. Ability to deliver on projects. Competent in leading and managing change and transformations; advises and coaches business leaders on change management best practice approach and provides the understanding, perspectives, tools and techniques to make change seamless and effortless.

• Team skills: Can be equally effective participating on team (as member) and on an individual basis. Works towards the organizational best interest rather than personal interests. Manages well across the matrix through individuals and processes both at a function level and across the business. Uses networks in strategic activities to achieve better business & in particular people outcomes. Fosters teamwork, comradery and accountability within the team in which they work. Seeks to strengthen teams with diversity and inclusion. Relates well to people at all levels. Builds effective relationships and gains trust and respect.

• Problem Solving: Can solve problems; takes a new perspective on existing solutions; exercises judgment based on analysis of multiple sources of information. Analyses situations and applies critical thinking to resolve situations and advises on courses of action. Evaluates the constraints and risks associated with each course of action identified and selects the viable option in order to address the problem.

• Reputation for Delivery: Consistently delivers against agreed project plans, is responsive and realistic about time/resources to deliver. Anticipates and prevents future problems, taking charge to bring about change and taking initiative within role. Has the ability to persuade key stakeholders to drive results. Develops and evaluates solutions to problems and implements solutions. Applies systematic thinking to identify new solutions. Able to win impact and influence regardless of organization boundaries and relationships. Is personally credible.

• Communication skills: Clearly articulates messages. Effectively listens, can express ideas in written format and verbal format clearly, succinctly and persuasively. Manages conflicts and can diffuse tensions across employees to resolve issues. Maintains confidences. Coach people managers to further develop their capability in their role and improve their own performance. Demonstrate coaching capabilities.

• Customer Focused: Thinks customer first and anticipates current and future needs. Acts with customers in mind and is dedicated to meeting the expectations and needs of internal customers. Uses first hand customer information and uses it for improvements in services.

Travel Requirements: 25-50%


Did you receive a recent promotion? First leadership role? Maybe an advancement from your current company or organization?
When you’re the new leader on the block, earning respect from peers and employees who don’t even know you can certainly be a struggle. A higher leadership status won’t automatically give you the authority or trust with your people that you need to get things done. You’ll have to earn that authority and trust to become an effective and successful leader or boss.
New leaders are stepping up every day. If you’re one of them, here are 7 ways that will bring you a level of respect that is meaningful and well-deserved.

1. Have an open door. Let your colleagues and employees know you are always available for them. The last thing you want is for the people you are leading to think you are unapproachable and unavailable, so let them know their wants, needs, and feedback are valued and a priority for you. If you are out of the office a lot, be sure to provide your people easy ways to contact you by phone, email, text messages, or other forms of communication. 
2. Appreciate effort. It is surely demotivating for employees when their hard work doesn’t seem to be appreciated by the organizations that employ them, or the men and women who lead them. Let workers know that you have noticed their effort, and even make a point of rewarding it when appropriate.
3. Care about employee well-being. Respect is easily earned when you show how much you care about the well-being and success of your peers and employees, both collectively and individually. Listen to what your team is saying whenever they discuss work or personal matters.
4. Be personable. Not everyone has to be your best friend, but a respectable leader is often a personable one. A focus of yours as a new leader should be to strengthen your relationships with those around you. Be aware of your own behavior and the way you come across to others. Be helpful, welcoming, and pleasant. Keep your relationships positive and amicable and success will surely follow. 
5. Provide a real sense of autonomy. If you’re a boss who micromanages, the people who work for you will invariably become frustrated because you’re sending a loud-and-clear message that you don’t trust their ability to do the work. Trust the people you’re leading to make the right moves and do their work well and empower them when possible. 
6. Be consistent. Follow through with what you say you’re going to do. Be on time to meetings so your employees aren’t twiddling their thumbs, waiting for you do show. Stick to deadlines. Don’t tell others to do one thing and then you do another. People will respect you more if they know you don’t offer only empty promises!
7. Be patient. New leaders require a great amount of patience—both with their teams and with themselves. Learning effective management will not happen overnight; it takes time (and, sometimes, mistakes) for you to learn the ropes and for others to acclimate to a new leader. Don’t worry—stick with it and you’ll get there.

At MCDA we can help! We offer leadership training across multiple levels of an organization. Reach out today for a free consultation.

Loan Forgiveness with Paycheck Protection Program Loans

For those who secured Small Business Administration (SBA) Paycheck Protection Program (PPP) loans, the conversation is now focused on two things:

  1. How to calculate and determine loan forgiveness scenarios
  2. Loan necessity

In general, some or all of the loan granted under the program may be forgiven if used on allowable expenses over the eight-week period after receiving the loan. This is subject to several rules around the components of the expenses as well as a comparison of the level of full-time equivalent (FTE) during the eight weeks post-funding to a base period.

However, there’s some ambiguity with the criteria and almost daily the SBA is issuing frequently asked questions and responses that impact the interpretation of the CARES Act provisions.

The Coronavirus, Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. The CARES Act included $349 billion allotted to the PPP.

The initial $349 billion contribution to the program lasted less than two weeks with around 1.7 million businesses receiving loans that averaged just over $200,000 each. On April 21, 2020, Congress announced plans to provide an additional $310 billion, which has now been funded.

So how is loan forgiveness calculated and how will forgiveness be granted?


It’s important to note that the SBA has been making interpretations and issuing responses to frequently asked questions at a rate of one per day. And the final interpretations are still to be determined. Keep in mind that forgiveness is subject to audit by the SBA.

The first step in addressing forgiveness is to determine the maximum allowable forgiveness amount (MAFA). The MAFA on a loan is composed of the sum of the allowable costs (listed below) incurred during the eight-week period after the loan is funded and can’t exceed the borrowed amount.

It’s also subject to limits; for example, payroll costs must be 75% or more of the MAFA.

Payroll Costs

For Individual employee whose compensation is over $100,000 annually, the amount above and beyond an annualized $100,000 is excluded from the calculation. Your MAFA will also be reduced if you decrease wages by more than 25% for any employee that made less than $100,000 from the most recent full quarter versus the eight-week period.

Payroll costs also include the following amounts paid to employees:

  • Commissions
  • Cash tip or equivalent
  • Vacation
  • Parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Provisions of group health care benefits, including insurance premiums
  • Retirement benefits
  • State or local tax assessed on the compensation of the employees
Not Eligible for Payroll Costs
  • The compensation of an individual employee in excess of $100,000, as prorated for the covered period
  • Taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code during the covered period
  • Any compensation of an employee whose principal place of residence is outside of the United States
  • Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act
  • Qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act

Non-Payroll Costs

No more than 25% of the MAFA may be for non-payroll costs.

Non-payroll costs include:

  • Interest on the mortgage obligation incurred in the ordinary course of business (principal excluded) with origination prior to February 15, 2020
  • Rent on written lease agreements with terms beginning prior to February 15, 2020
  • Payments on utilities (electricity, gas, water, transportation, telephone, or internet) with service started prior to February 15, 2020

Once the MAFA is determined, the next step is to assess if it will be reduced based on employment levels.

Staff Reductions

If there’s a reduction in staff, loan forgiveness will be reduced by the percentage reduction in FTE over the eight-week period after the loan is received.

To calculate the amount, the average FTE over the eight-week period is divided by the lesser of the following periods below:

  • Average FTE per month between February 15, 2019, and June 30,2019
  • Average FTE per month between January 1, 2020, and February 29, 2020

This gives you a percentage that’s then applied to the MAFA to determine the forgiveness amount. There are additional special provisions for seasonal businesses that aren’t addressed here.

Note: The definition of full-time equivalent may vary by lender, so it’s important to consult with legal counsel and your lender as to the agreed-upon definition. The American Institute of Certified Public Accountants, known as the AICPA, recommended in a publication dated April 28, 2020, that FTEs should be in line with the definition under the Affordable Care Act of 30 hours per week.


There are additional provisions relating to the determination of FTEs. In particular, there’s a special exclusion under the CARES Act when it comes to rehiring.

A borrower that reduced or plans to reduce the number of full-time employees on its payroll between February 15, 2020, and 30 days after the PPP’s enactment can re-hire those employees prior to June 30, 2020, and could receive the benefit of the pre-reduction FTE count on its loan forgiveness calculation.

While this exclusion may have only a minor impact on MAFA, it could result in a significant increase to the percentage calculation above, which could result in a much higher forgiveness amount.

An interesting scenario has occurred as many furloughed employees are opting to not accept the rehire opportunity as current state and federal unemployment payments might be deemed more attractive. In response to this situation, the SBA addressed the question of what happens to the employer’s calculation if the employee refuses the offer.

The response in FAQ 40, which was published May 3, 2020, is as follows:

“As an exercise of the Administrator’s and the Secretary’s authority under Section 1106(d)(6) of the CARES Act to prescribe regulations granting de-minimis exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation. The interim final rule will specify that, to qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.”

Comparison of Periods and Amounts

The period of time covered for the PPP loan calculation is an average monthly payroll cost multiplied by 2.5 versus the forgiveness that’s calculated based on an eight-week period post-funding. The amounts used for the loan request don’t include components such as rent and utilities that are part of the forgiveness calculation. As a result, it isn’t safe to assume your PPP loan will be 100% forgiven.

Loan Necessity

The PPP world was turned upside down when the SBA issued FAQ 31 addressing if businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan.

Here’s the answer: “In addition to reviewing applicable affiliation rules to determine eligibility, all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant. Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.”

Of particular note is that borrowers must assess their economic need for a PPP loan according to the standards in the CARES Act and PPP regulations. They also must certify in good faith that their PPP loan is necessary.

Returning Funds

Subsequently, the question was raised about private companies and the response was to refer to FAQ 31.

This created confusion for many companies, and was exacerbated further by the need to determine if the money isn’t considered necessary. If so, then the funds should be returned by May 7, 2020, to be considered as acting in good faith.

On May 5, the SBA issued FAQ 43, which extended the safe harbor deadline to May 14. In short, there are important analysis, decisions, and actions to be taken that are time sensitive to arrive at a conclusion. Reaching out to your essential business advisors and legal counsel now is prudent.

How Forgiveness Is Granted

Once a determination is made to retain funds, borrowers must apply for forgiveness through their lender, and the application must include documentation verifying maintenance in employee base, pay rates, and payroll tax filings.

Documentation also will need to verify payments on allowable costs. Certification will be required from a business representative stating that the documentation provided is true and accurate.

The application for forgiveness is due within 90 days of the expiration of the eight-week post-funding period. Then the approval process is expected to be completed within 60 days of the application.

Note on Affiliation Rule

The SBA uses the affiliation rule to decide whether a business’s affiliations preclude it from being considered small.

Generally, affiliation exists when one business controls or has the power to control another, or when a third party or parties controls or has the power to control both businesses. The determination of whether an affiliation exists is a legal matter and should be addressed by an attorney.

Here are some general guidelines that may indicate entities are affiliated:

  • Control 50% or more of voting stock
  • Control less than 50% of voting stock, but considered large compared with others
  • Common management between two companies
  • Identical or dependent businesses, with common ownership

Most private equity and venture-capital backed portfolio companies may be considered affiliated.

When Affiliation Rule Is Waived

There are three instances when affiliation rules are waived:

  • The NAICS code begins with 72.
  • A franchise with a franchise identifier code assigned by SBA.
  • A business that receives SBIC financial assistance

Tax Considerations

Debt forgiveness isn’t taxable income for federal income tax purposes. However, there is more to the story.

For example, if someone has a $1.5 million loan and gets $1 million forgiven, it’s typically taxable as cancelation of debt income (CODI). But that isn’t the case here. If you use those proceeds to pay for expenses like payroll and rent, it isn’t deductible if paid by forgiven money. As a result of the non-deductibility of the expenses, the net effect is as if the CODI is taxable income.

There are discussions in Congress now that may adjust this—to allow for deduction of the expenses paid with PPP forgiveness funds; however, at the time of this article they aren’t deductible from a federal perspective.

States, meanwhile, are expected to tax the CODI and allow for the deduction of expenses paid with the PPP funds. 

PPP Alternative

If you receive a PPP loan, there could be a loss of benefits from other programs.

This might mean that you lose the ability to:

  • Use certain tax credits, such as the employee retention tax credit
  • Defer Social Security and Medicare tax payments at the time loan forgiveness is determined or approved by the lender. However, the amount of the deposit and payment of the employer’s share of Social Security tax that was deferred through the date that the PPP loan is approved to be forgiven continues to be deferred and will be due on the applicable dates.

Loan forgiveness could also be reduced by reducing your workforce or compensation.

Employee Retention Tax Credit

There are two criteria for the employee retention tax credit:

  • For businesses with 100 or less full-time employee, the credit is based on all wages paid to employees
  • For businesses with greater than 100 full-time employees, the credit only applies to wages paid to employees during the time they aren’t providing services due to COVID-19

Qualifying businesses must have experienced either of the following:

  • Partial or full suspension of operations due to governmental orders that limited commerce, travel, or group meetings due to COVID-19
  • A significant decline in gross receipts—this begins with the period in which gross receipts are less than 50% of the gross receipts of the same prior calendar-year quarter and ends with the quarter when gross receipts are 80% of the gross receipts for the same prior-calendar quarter
  • Credit is available up to 50% of $10,000 of wages per employee.
  • Credit offsets Federal Insurance Contributions Act (FICA) taxes due and the excess is refundable.

Combination with PPP Loan

Many employers were hoping to utilize the employee retention tax credit after they exhausted their PPP loan to help maximize their cash opportunities. However, the IRS provided further guidance limiting employers to only one of the immediate cash opportunities. 

Employers who received a PPP loan are ineligible for the credit regardless if their loan is forgiven or they pay the loan back in its entirety; there was a limited exception for employers who returned their PPP loan by May 14. Employers who applied for a PPP loan and were denied, meanwhile, can still utilize the credit to the extent they don’t try to apply for the PPP loan again at a future date.

We’re Here to Help

This is merely a high-level overview of the major provisions that doesn’t take into account all of the details that should be addressed.  For more insight on how to calculate PPP loan forgiveness or alternate options for cash flow or funding. Contact us today for further assistance.