On Friday, May 15th, the SBA released the much anticipated PPP Loan Forgiveness Application. The application and related instructions do not provide as much guidance and detail as we expected, but there are still several key takeaways as outlined below:
Alternative Payroll Covered Period: For administrative convenience, Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the eight-week (56-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date (the “Alternative Payroll Covered Period”). For example, if the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20.
Eligible payroll costs: Borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the eight-week (56-day) Covered Period (or Alternative Payroll Covered Period defined above) (“payroll costs”). Payroll costs are considered paid on the day that paychecks are distributed or the Borrower originates an ACH credit transaction. Payroll costs are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date. Otherwise, payroll costs must be paid during the Covered Period (or Alternative Payroll Covered Period).
Eligible non-payroll costs: An eligible non-payroll (mortgage interest, rent and utilities) cost must be paid during the Covered Period or incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period. Eligible non-payroll costs cannot exceed 25% of the total forgiveness amount.
Non-Compensation payroll costs to Owners (owner-employees, self-employed individuals, general partners): It appears that non-compensation payroll costs (health insurance and retirement costs) for owner-employees, self-employed individuals and general partners are not eligible for forgiveness.
It is possible (and likely) that additional guidance and clarification will be issued. At that time, we will follow-up as appropriate.
Click here for a link to the SBA Forgiveness Application.
Click here for a link to a detailed article by Tony Nitti discussing the application.
Please let us know if you have any questions.