New Guidance - PPP Loan Forgiveness Application

Below is a summary of the interim guidance:

Loan Forgiveness Process

• A PPP loan of any size can be reviewed at the SBA's discretion. 
• Lenders have 60 days to review the submitted loan application.
• Subject to any SBA review, the SBA will remit the appropriate forgiveness amount to the lender plus interest within 90 days.  
• The SBA will determine a borrower's eligibility for the PPP loan based on the provisions of the CARES Act, SBA rules, and guidance available at the time of the loan application, and the terms of the loan application.
• Loans deemed ineligible will not receive forgiveness. 
• Any portion of the loan that is not forgiven will be eligible for loan repayment over two years at 1%. 

Payroll Costs Eligible for Forgiveness

• Payroll costs are considered paid on the date checks are distributed or on the date when the borrower originates an ACH credit transaction.
• Borrowers are allowed to include payroll costs that were incurred over a period of not more than 8 weeks. Payroll costs incurred during the borrowers last pay period of the covered period or the alternative covered period are eligible for forgiveness if paid on the next regular payroll date. Otherwise payroll costs must be paid during the covered period to be eligible for forgiveness.
• Wages, salaries, commissions, or similar compensation paid to furloughed workers during the covered period are eligible for forgiveness. 
• Hazard pay and bonuses are eligible for forgiveness, as long as they do not exceed an annual salary of $100K, prorated over the covered period.
• The amount of loan forgiveness requested for owner-employees and self-employed individuals payroll compensation can be no more than the lesser of 8/52 of 2019 compensation or $15,385. Owner-employees can include retirement expenses and healthcare plan expenses to the extent that their total compensation does not exceed $100K; self-employed individuals cannot.
• Schedule C owner's payroll costs are capped at their 2019 net profit.
• General partner's payroll costs are capped by the amount of their 2019 net earnings from self-employment (reduced by Section 179, unreimbursed partnership expenses, and depletion multiplied by 92.35%). 

Non-payroll Costs Eligible for Loan Forgiveness

• A non-payroll cost is eligible for forgiveness if it is paid during the covered period or incurred during the covered period, and paid on the next billing date. 
• Advance payments of interest on mortgage obligations are not eligible for loan forgiveness

Reductions to Loan Forgiveness

• Employees whom the borrower offered to rehire at the same hours and wages are generally exempt from the loan forgiveness reduction calculation.
• To be eligible for forgiveness, borrowers must retain records documenting the offer and its rejection.
• Borrowers are required to inform applicable state unemployment offices of the employee's rejection of the job offer within 30 days. 
• Borrowers do not get credit for employees who work over 40 hours per week.
• To ensure that borrowers are not doubly penalized, the salary wage reduction only applies to the portion of the decline in employee salary and wages that is not attributable to a full-time equivalent (FTE) reduction. If you maintain the same rate of pay and reduce the employee's hours by half, the half a point reduction is included in the FTE limitation and should not be double counted in the wage and salary reduction limitation.
• If the borrower eliminates the salary and wage reduction or FTE reduction by not later than June 30, 2000 or earlier, the borrower is exempt from the FTE reduction and the salary and wage deduction. Simply restoring by June 30, 2020 would not result in any forgiveness if the borrower did not have permitted costs during the covered period.

Loan Documentation Requirements

• The loan forgiveness application provides the documentation requirements that each borrower must submit with its loan forgiveness application.

Contact your Whittlesey advisor for more information.