GUIDANCE ON PPP LOAN FORGIVENESS

A loan forgiveness application must be submitted within 10 months of the completion of the Covered Period. An applicant may select a Covered Period up to 24 weeks after the funded date in order to maximize their potential forgiveness.

• All non-payroll costs must be incurred or paid during the Covered Period.
• Payroll and non-payroll expenses are eligible for forgiveness if:
  • Incurred prior to the Covered Period but paid during the selected Covered Period (up to 24 weeks from funded date); or
  • Incurred during the Covered Period and paid on or before the next payroll or billing cycle
• December 31, 2020 payroll cost extension: An applicant may apply payroll costs to their forgiveness up to, but not after, December 31, 2020 to maximize forgiveness. This extension does not apply to non-payroll expenses.

If you are an owner of a C Corp, an S Corp, or a partnership, please note that there are additional rules and exceptions. You can find more information on the SBA’s August 11th update on page #4. Click here to access this page from the SBA website.

If a seasonal employer elected to use a 12-week period between May 1, 2019 and September 15, 2019 to calculate the loan amount, the same 12-week period must be used for the forgiveness calculation.

Total cash compensation, which includes compensation, tips, commissions, bonuses and hazard pay, is limited to $100,000 per employee on an annualized basis. However, the gross payroll amount continues to be what is used for the forgiveness calculation, rather than cash compensation.

Borrowers qualify for this option if they:

• Are self-employed and have no employees; OR
• Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
• Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.

View the EZ Forgiveness Application (Form 3508EZ)

• Borrowers that do not meet the above criteria must apply via the full forgiveness application.
• View the Full Forgiveness Application (Form 3508)

The Paycheck Protection Flexibility Act of 2020 was signed into law on June 5, dramatically improving several critical forgiveness terms of the PPP. The key improvements:

• Extends the 8-week forgiveness period to 24 weeks, permitting any borrower to use the extended time-frame or the original 8-week period.
• Changes the 75%-25% breakdown of payroll to non-payroll expenses to 60%-40%. A minimum of 60% of the loan proceeds must be used for payroll to be eligible for full forgiveness.
• Extends the loan maturity to 5 years for all loans funded June 5th and beyond. Any pre-existing loans may amend the note to reflect new maturity terms if lender and borrower mutually agree.
• Extends the loan forgiveness period from June 30, 2020 to December 31, 2020.
• Does not impact forgiveness application.
• The deferral period of the loan is pegged to date the forgiveness application is submitted to the lender or 10 months after the end of the 24-week covered period.
• Expands safe harbor rules for rehiring employees by allowing for a reduction in employees if borrower is able to document:
  • Inability to rehire employees
  • Inability to hire similarly qualified employees
  • Lack of return to same level of business activity as existed at or before February 15, 2020