The Small Business Administration has released the PPP Loan Forgiveness Application and related instructions. The SBA has also released a new PPP EZ Loan Forgiveness Application and instructions for certain borrowers.
Can I apply for forgiveness using the EZ Loan Forgiveness Application?
This application has significantly fewer reporting requirements. All required attachments to the application are included in the instructions. Borrowers that can certify to one of the following three requirements can use the simplified form:
- A self-employed individual who had no employees at the time of the PPP application
- Did not reduce the salaries of employees more than 25% and did not reduce the number or hours of employees
- Experienced reductions in business activity as a result of health directives related to COVID-19 and did not reduce salaries by more than 25%
Will the interest that my Bank is accruing on the loan be eligible for forgiveness?
Yes. The amount of the loan forgiveness can be up to the full principal amount of the loan plus accrued interest.
How do I elect the 8 or 24 week period for forgiveness?
The borrower will enter the elected covered period on the loan forgiveness application.
Can a borrower apply for forgiveness before the end of the covered period?
The required attachments to the Loan Forgiveness application state that they should include payroll and FTE information through the end of the covered period. The covered period is specifically defined in the instructions as an 8 week period or 24 week period. The SBA may release additional guidance on applying early in future FAQs.
What amount of compensation can be included?
Employee compensation: Employees’ compensation is capped at $15,385 for the 8 week period and $46,154 for the 24 week period.
Owner-Employees, Self-employed Individuals and General Partners Business Owners’ Compensation: Owners’ compensation is capped at $15,385 for the 8 week period and $20,833 for the 24 week period. This is a reduction of the capped amount for employees for the 24 week period, which is $46,154. There is specific commentary in the interim final rule discussing the reasoning behind a reduced cap for these business owners. The Administration is attempting to prevent a windfall for business owners who receive PPP loans using employee wages and then eliminate the employee’s position subsequently.
What amount of owner retirement benefits can be included?
Retirement contributions for S Corp owners are allowed as an eligible cost for forgiveness. Retirement contributions for partners in partnership and sole proprietors are not allowed as an eligible cost for forgiveness.
How do I gather the required payroll documentation for the application?
Third party payroll processors are working diligently to create reports for their clients. If you use an outside service provider, contact them or review their websites for the options and custom reporting. Many service providers are creating tools to determine the projected reduction in forgiveness for reductions in salaries and FTEs. You will need to review their reports for accuracy, but they are deemed acceptable forms of documentation in lieu of bank statements showing payments of payroll.
Can I still apply for a Payroll Protection Program loan?
Yes. The program is set to expire on June 30, 2020. You should reach out to your banker as soon as possible if you are interested in a PPP loan.
Can Mitchell Wiggins assist in the loan forgiveness application?
Yes. Our PPP Task Force will be communicating firm services in the near future. If you have urgent needs, please contact your Mitchell Wiggins team for additional information.
What do we still not know?
- What constitutes documentation for self-employed and partner compensation?
- The application is unclear as to the specific documentation required to be provided for self employed owners and partners that do not receive compensation through wages and payroll. We anticipate this will be released soon in an SBA FAQ.
- What items are included in the definition of utilities?
- With the option for the 24 week covered period and the significant expansion of payroll costs that can be utilized for each employee, there is less urgency and need in the non-payroll costs. The SBA may release additional information in a future FAQ.