On Friday, May 22, the Small Business Administration (SBA) issued new guidance related to the Paycheck Protection Program (PPP) loan forgiveness application form (attached here). In addition, the SBA issued further guidance related to the loan review procedures and the related borrower and lender responsibilities (attached here). Although the new guidance does not alter any of the calculations set forth in the previously issued loan forgiveness application, it does provide further clarification. Below are some of highlights:
- The new guidance makes it clear that “payroll costs” are to be defined broadly, and forgivable compensation is to include salaries, hourly pay, bonuses, hazard pay, commissions and any other like compensation.
- Both “payroll costs” and “non-payroll costs” that are paid during the 8-week (56-day) covered period and also incurred during the 8-week (56-day) covered period will qualify for forgiveness. In other words, eligible expenses paid during the covered period, even if not incurred during the covered period, can be included in the forgiveness calculation if the payment of those expenses occurs as a result of standard and timely business payment cycles.
- In calculating FTE and 25% salary/hourly wage forgiveness limitations, there should be no double-counting for a single employee. In other words, if an employee reduces a borrower’s FTE count during the covered period, the borrower will not need to apply the 25% salary/wage reduction limitation to that same employee.
- Borrowers will be required to report the names of those employees who were offered their jobs back but rejected the offer to their state unemployment agencies. Those employees will be denied unemployment benefits.
- Lenders must decide on loan forgiveness within 60 days of receipt of the complete application from the borrower. The SBA then has 90 days to review the loan forgiveness application.
- The SBA may review any PPP loan, regardless of size, to determine if the borrower is eligible for PPP loans under the CARES Act, whether the borrower calculated the loan amount correctly and used the funds for eligible costs, and whether the borrower is eligible for the amount of loan forgiveness it requests.
- Lenders will not be paid their fees for any PPP loans the SBA deems ineligible .This includes a 1-year clawback provision on bank fees for those loans.
Unfortunately, the new guidance did not extend the 8-week forgiveness period or modify the requirement to spend 75% of the funds on payroll cost. However, both the Senate and House of Representatives are working on legislation to extend the 8-week forgiveness period to 16-24 weeks and eliminate the requirement to spend 75% rule.
In the meantime, if you need assistance completing your PPP loan forgiveness application and calculating your loan forgiveness amount, Cassady Schiller is available to help. Please let us know if you have any questions or require assistance.