On August 4, the U.S. Small Business Administration (SBA), with the U.S. Treasury, released guidance answering 23 frequently asked questions concerning the forgiveness of Paycheck Protection Program (PPP) loans.
The FAQs are in a 10-page document divided into four sections that address different aspects of the process. Also included are calculations that PPP borrowers should use to determine how much of their loan can be forgiven.
The four FAQ sections and their highlights:
- General loan forgiveness. The first of the three FAQs in this section clarifies that sole proprietors, independent contractors and self-employed individuals who did not have employees at the time of the PPP loan applications, and so did not include employee salaries in the average monthly payroll calculation on their Borrower Application Form, automatically qualify for, and should, use the PPP Loan Forgiveness Application Form 3508EZ.
- Loan forgiveness payroll costs. The last of eight FAQs in this section addresses how to determine the amount of owner compensation that is eligible for loan forgiveness. The question also addresses partial pay periods, group healthcare benefits, and payroll costs incurred or paid outside of the eight- or 24-week covered periods.
- Loan forgiveness non-payroll costs. Of the seven FAQs, the sixth addresses:
- payments of transportation utility fees assessed by state and local governments that are eligible for loan forgiveness;
- how to proceed with non-payroll costs incurred or paid outside the eight- or 24-week covered periods; and
- whether the Alternative Payroll Covered Period for payroll costs also applies to non-payroll costs (it doesn’t).
- Loan forgiveness reductions. The fourth of five FAQs explains how borrowers should calculate the reduction in their loan forgiveness amount after having to reduce employee salaries or hourly wages.
Through July 31, the PPP funded nearly 5.1 million forgivable loans, totaling more than $521 billion, to help small businesses and other eligible entities affected by the recession that followed the COVID-19 pandemic. More than $130 billion is still available in the PPP, which has an August 8 deadline for applications to be approved by SBA.
Please contact REDW Principals James Ortiz or Christina Roderick to discuss any concerns you may have regarding your PPP loan, forgiveness calculations, or other PPP-related issues.
REDW is committed to keeping you informed at all times, but especially during a crisis of the magnitude of the COVID-19 pandemic. Stay connected with us on LinkedIn and @REDWLLC. Or check out some of our other updates on our COVID-19 Resource Hub.
