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SBA Releases PPP Loan Forgiveness Application
The SBA and Treasury released an application for Paycheck Protection Program (PPP) loan forgiveness along with instructions for completing the form.
The form and instructions offer borrowers a summary of eligible payroll and nonpayroll costs, explanations of loan forgiveness reductions (calculations for full-time equivalents and wage reductions) and details on how to apply for forgiveness of their PPP loans.
The SBA’s form and instructions include:
- Options for borrowers who use a biweekly or more frequent payroll schedule to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles.
- Flexibility to include eligible payroll and non-payroll expenses paid or accrued during the 8-week period after receiving their PPP loan. Non-payroll expenses that are incurred during the covered period can be included but must be paid by the next billing cycle.
- Implementation of exemptions from loan forgiveness reduction based on rehiring by June 30.
- Exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined by the workers.
- A list of documents that each borrower must submit with the loan forgiveness application, and documents that borrowers must maintain but do not need to submit.
The ratio of forgivable costs remains at 75% eligible payroll costs, 25% eligible nonpayroll costs.
Owner’s compensation: Business owners cannot increase their salary over the prior year (if less than $100,000) and have the excess qualify for forgiveness. While some type of hazard pay or bonus pay can be done for employees, owners must use their 2019 compensation levels, or $100,000, whichever is less. Owners who are in the middle of payroll changes now and cannot increase their own compensation may consider compensation changes for employees to reach the 75% cost threshold. Note: While owners need to be consistent with their pay, “family member pay” is allowed.
Retirement contributions: There is no limit on retirement contributions, including accrued costs, paid during the 8-week period. This may be an opportunity for companies to pay 2019 accrued retirement contributions during the 8-week period and have those retirement costs count toward the 75% payroll cost threshold.
Many questions remain unanswered. The SBA will release further guidance and clarification soon to assist borrowers as they plan for spending related to their loan proceeds and complete their loan forgiveness applications.
Reach out to your Yeo & Yeo professional about your individual situation. Visit Yeo & Yeo’s COVID-19 Resource Center for ongoing updates and resources available to further assist you.