PPP Loan Forgiveness Update

On August 4, 2020, the SBA and Treasury issued Frequently Asked Questions (FAQs) on PPP Loan Forgiveness to provide additional guidance to PPP borrowers and lending institutions regarding loan forgiveness.  The full FAQs are linked below.  Highlights from the FAQs include:

General Loan Forgiveness FAQs

• Sole proprietors, independent contractors, and self-employed individuals with no employees automatically qualify to use the expedited Loan Forgiveness Application Form 3508EZ
• So long as a borrower submits a completed forgiveness application within ten months of the end of the applicable Covered Period (8 weeks, 24 weeks, or December 31, 2020, depending on when the loan was originated and whether the borrower elected for the 8-week period), the borrower does not have to make any payments on the loan until a forgiveness decision is remitted by the SBA
  

Loan Forgiveness Payrolls Costs FAQs

• Payroll costs paid or incurred during the Covered Period (or Alternative Payroll Covered period, if applicable), are forgivable—this means that payroll costs incurred before the Covered Period but paid during the Covered Period and payroll costs incurred during the Covered Period but paid after the Covered Period (and on or before the next regularly scheduled payroll date) are both forgivable expenses
• Cash compensation should be calculated using the gross amount of compensation
• Payroll costs include all forms of cash compensation (up to $100,000 annually for any person, prorated for the Covered Period), including tips, commissions, bonuses, and hazard pay
• Forgiveness is not available for group health benefits accelerated from periods outside of the Covered Period (or Alternative Payroll Covered Period)
• Forgiveness is not available for employer contributions for retirement benefits accelerated from periods outside of the Covered Period (or Alternative Payroll Covered Period)
• Payroll forgiveness for owner-employees or self-employed individuals is capped at $20,883 per individual (or $15,385 if electing to use the 8-week Covered Period) in total across all businesses in which he or she has an ownership stake
  

Loan Forgiveness Nonpayroll Costs FAQs

• Qualifying nonpayroll costs incurred prior to the Covered Period, but paid during the Covered Period are eligible for forgiveness
• Qualifying nonpayroll costs incurred during the Covered Period, but paid after the Covered Period, are eligible for forgiveness so long as paid on or before the next regular due date
• Although payment of interest on unsecured credit incurred before February 15, 2020 is a permissible use of PPP loan proceeds, these payments are not eligible for loan forgiveness
• Payments on renewed leases and interest payments on refinanced mortgage loans are eligible for forgiveness, so long as the original lease or mortgage existed prior to February 15, 2020
  

Loan Forgiveness Reduction FAQs 

•  A seasonal employer must use the same 12-week period as the reference period for calculation of the loan amount in calculating any reduction to loan forgiveness
• The FTE reduction calculation and FTE reduction exceptions, should take into account all employees, including those that make more than $100,000 annually
• For purposes of calculating whether the loan forgiveness amount should be reduced due to salary/wage reductions in excess of 25%, the borrower should only take into account salaries and wages—and not other forms of compensation—in calculating the forgiveness reduction
  

Please contact a MacDonald Illig attorney if you have any questions regarding PPP Loan Forgiveness.