Guidance on the SBA’s New Applications for PPP Loan Forgiveness

On June 16^th the Small Business Administration (SBA) released a series of new applications and instructions for the forgiveness calculation for the Paycheck Protection Program (PPP) loans. The application has been broken down into two documents: application and instructions. A new, simpler EZ form with corresponding instructions has also been introduced.

AAFCPAs has provided for your convenience some of the key details below:

• Shorter, 3-page EZ application for organizations who can certify one of the following 3 criteria:
  • The borrower is a sole proprietor, independent contractor, or self-employed individual without employees;
  • The borrower did not reduce annual salary or hourly wages of any employee by more than 25% during the covered period compared to the period between January 1, 2020 and March 31, 2020, AND did not reduce the number of employees or average paid hours of employees between Jan 1, 2020 and the end of their covered period;
  • The borrower did not reduce annual salary or hourly wages of any employee by more than 25% during the covered period compared to the period between January 1, 2020 and March 31, 2020, AND was unable to operate during the covered period at the same level of business activity as before Feb 15, 2020 due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.
• Compensation per employee is capped at $15,385 if you elect an 8-week covered period, and $46,154 if you elect a 24-week covered period.
• Owner compensation for a 24-week period is limited to $20,833 (which would have been the maximum loan amount for an owner with no employees).
• 60% payroll cost expense test will function the same as the original 75% test.
• Confirms that the FTE count will need to wait until the end of your chosen covered period (8 or 24 weeks). Therefore, a borrower choosing 24-weeks will need to wait until the end of that 24-week period to apply for forgiveness.
• Introduction of the FTE safe harbor when a borrower is unable to operate during the covered period at the same level of business activity as before Feb 15, 2020 due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.
• Additional certification and documentation related to the above statement that the borrower was unable to return to the same level of business activity. AAFCPAs anticipates the SBA and Treasury will issue further guidance to clarify how to certify a business is “unable to return to the same level of business activity.”

How May AAFCPAs Help?

We advise borrowers to reach out to your AAFCPAs Partner to discuss your particular facts & circumstances so we may ensure you remain in compliance while maximizing your opportunity for debt forgiveness.

• Utilizing our internal expertise and calculator tool, we can assist with forecasting and modeling the PPP loan forgiveness calculation which will include scenario planning and strategies to maximize the forgiveness amount.
• We assist with monitoring of actual costs to planned costs over the chosen covered period.
• We provide guidance on optimizing application of costs to various sources of funding received.
• We provide assistance with the preparation of the final PPP Loan Forgiveness Calculation.
• We review management-prepared loan forgiveness calculations and provide guidance on compliance and maximizing debt forgiveness.

If you have any questions, please contact Dan Stanhope, CPA, at 774.512.4134, dstanhope@nullaafcpa.com; or your AAFCPAs Partner.