The SBA has released the application for PPP loan forgiveness and clarification of several key questions regarding eligible expenses.
Alternate Payroll Period
Rather than using the 8 week period after the loan proceeds for payroll purposes, the SBA has allowed an alternate period that will align with a borrower’s normal payroll cycle. This alternate period begins on the first pay period following the receipt of PPP funds. This alternate period must be used throughout the calculation and only applies to the payroll related costs.
Terminated or Voluntary Resigned Employees
Any employees who during the forgiveness period (a) were fired for cause, (b) voluntarily resigned, or (c) voluntarily requested and received a reduction of their hours, will not reduce the Borrower’s loan forgiveness.
Safe Harbor for Rehire Requests
If an employer furloughed or laid off an employee then, during the covered period, makes a written offer to rehire the employee and the employee rejects that offer, these full time reductions will not reduce the borrower’s loan forgiveness.
Costs Paid or Incurred
The CARES act legislation stated that forgivable expenses had to be paid and incurred. The SBA as provided flexibility and eligible expenses do not have to be paid in order to be eligible. Items that the borrower is liable for can be included as long as they are paid on or before the next regular billing date. Even if that billing date is outside of the covered period. Or the borrower can include items paid during the period.
Payroll costs incurred but not paid during the borrower’s last pay period of the forgiveness period are eligible for forgiveness if paid on or before the next regular payroll date.
Eligible rent expenses include business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020. There is no exclusion of related party lease and rent expense.
Verification of Existence of Non-Payroll Costs
Borrowers will be required to provide copies of utility bills and lease payments not only for the covered period, but for February 2020 as well. This will provide substantiation verifying existence of the obligations/services prior to February 15, 2020.
The Borrower must keep all supporting documentation for six years after the date the loan is forgiven or repaid in full.
We will continue to monitor this ever changing landscape and know this is a difficult time for you and your business. We are here to assist with any questions on PPP loans or COVID-19 legislation.