Small Business Solutions

As you navigate through some of the uncertainties you may have about the Paycheck Protection Program, we want you to know we’re here for you. Understand your solution options by downloading our PPP forgiveness calculator. Being able to answer how much of your loan will be forgiven, offers peace of mind so you can focus on your business. Don’t have a PPP loan? No problem, our burn rate, and runway calculator is a great fiscal tool to help plan your future.

Paycheck Protection Program (PPP) Application for Forgiveness

The Small Business Administration (SBA) has issued the Loan Forgiveness Application for PPP recipients. This 11-page document is will test your patients and additional guidance is expected for borrowers and lenders. Buckle up!

The application provides instructions to help applicants navigate the PPP loan forgiveness process – companies must complete detailed calculations to determine forgiveness amounts. The 11-page application package summarizes eligible and non-eligible payroll costs and clearly outlines the required documents.

Forgivable Costs and Amounts

  • Eligible payroll costs, as defined by the April 2 Interim Final Rules
  • Amounts paid to owners(owner-employees, self-employed individual, or general partners), capped at the lower of 1) $15,385 (the eight-week equivalent of $100,000 per year) per individual; or 2) the eight-week equivalent of their applicable compensation in 2019
  • Covered mortgage, rent, and utility obligations – services incurred or in place before Feb. 15, 2020. (includes both real and personal property)
  • The ratio of forgivable costs remains at 60% eligible payroll costs, 40% eligible nonpayroll costs.
  • The SBA will reduce the amount forgiven by any Economic Injury Disaster Loan advance that was received.

Timing of Forgivable Costs

The application defines two options for calculating covered payroll costs:

  1. Covered Period: “…The twenty four-week (168-day) Covered Period of your PPP loan. The first day of the Covered Period must be the same as the PPP Loan Disbursement Date.”
  2. Alternative Payroll Covered Period: “Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the twenty four-week (168-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date.”

When completing the application, be careful not to overlook certain areas requiring a selection of “one covered period”. Borrowers who choose to use the Alternative Payroll Covered Period must apply that period wherever the application references “the Covered Period or the Alternative Payroll Covered Period.”

We suggest getting familiar with the application as soon as possible in order to be informed of the specific information on when costs are counted as incurred or paid.

Definition of A Full-Time Equivalent Employee

  • “For each employee, enter the average number of hours paid per week, divide by 40, and round the total to the nearest tenth.”
  • Simplified method – Assign a 1.0 for employees who work 40 hours or more per week, and 0.5 for employees who work fewer hours

Definition of Cash and Non-Cash Compensation

Cash compensation is capped at $15,385 per employee and includes:

  • Gross salary, gross wages, gross tips, and gross commissions
  • Paid leave (vacation, family, medical or sick leave; not including leave covered by the Families First Coronavirus Response Act)
  • Allowances for dismissal or separation for each individual

Non-cash compensation includes payment of:

  • The provisions of group health care benefits, including employer contributions to a self-insured, employer-sponsored group health plan, but excluding any pre-tax or after-tax contributions by employees
  • Contributions to retirement benefit plans, excluding any pre-tax or after-tax contributions by employees
  • State or local tax assessed on the compensation of employees

Reductions in Loan Forgiveness

In general, employers are subject to a reduction in their PPP loan forgiveness amount corresponding with reductions in their average number of full-time equivalent employees during the covered pandemic period, unless they eliminate that reduction – i.e., rehire those employees.

Revisions in the act establish this calculation will not include:

  • Any positions for which the Borrower made a good-faith, written offer to rehire an employee
  • Any employees who were fired for cause, voluntarily resigned, or voluntarily requested and received a reduction of their hours.

Request our PPP calculator to determine if your forgiveness amount will be reduced based on Full-Time Employee headcount.

Other Information

Instructions in the application include:

  • Documentation requirements: Which payroll and nonpayroll documentation must be submitted to lenders.
  • Certifications: Yes, you have to certify that calculations are correct and appropriate and that the required documentation has been submitted.
    • Penalties for false statements may include: “Imprisonment of not more than five years and/or a fine of up to $250,000, two years and/or a fine of not more than $5,000; and, if submitted to a Federally insured institution, by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.”

Guidance is Needed for the Following:

  • Payroll Costs
  • Retroactive bonuses from the prior year
  • Amounts paid to owners
    • The threshold for ownership percentage (self-employed)
    • Attribution rules – family members of an owner
    • Businesses which opened in 2020
  • Noncash Compensation
  • Discretionary Profit-Sharing Contributions – can these be prorated over the eight weeks?
  • Covered rent obligations – eligibility of CAM or Real Estate Taxes
  • Requirements by Borrowers to maintain employees after the Covered Period or June 30, 2020
  • Retention of unused Loan Funds for Borrowers that did not retain or maintain payroll for the Covered Periods
  • Permitted use of unused Loan Funds after forgiveness
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