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The SBA has released the Paycheck Protection Program (PPP) Loan Forgiveness Application.

May 16, 2020

On May 15, 2020, the SBA released the PPP Loan Forgiveness Application (the Application). The application clarifies some of the questions that we have been asking since the PPP’s inception.

We will analyze the Application and guidance in the coming days and will be scheduling another webinar walking through the Application along with items to consider. In the meantime, the following are some important highlights of the Application:

  • Alternative Payroll Covered Period – The CARES Act originally established that the 8 week period began on the date the PPP loan was disbursed to the borrower. This was inherently problematic for borrowers as they had no control on when they would receive their loan proceeds and could not coordinate the timing of the disbursement to coincide with their payroll periods. The Application allows a borrower with a bi-weekly or weekly payroll to elect to have their 8 week covered period begin on the first day of the first payroll period after the date their loan proceeds were disbursed to them. For example, if the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20.
  • Eligible Costs Incurred But Not Paid During The Covered Period – Eligible costs incurred during the 8 week period are eligible for forgiveness as long as such eligible costs are paid on or before their next due date. For example, payroll costs incurred but not paid during the last week of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness as long as such payroll is paid on or before the next regularly scheduled payroll date
  • Full Time Equivalent (FTE) Definition – FTEs are calculated by dividing the total hours paid for each employee during the Covered Period (or Alternative Covered Period) by 40, rounded to the nearest tenth. Each employee is limited to a value of 1.0. Alternatively, a borrower can elect to assign each employee who regularly works 40 hours or more a value of 1.0 and .5 for employees who work regularly less than 40 hours.
  • Salary/Hourly Wage Reduction – Salary/hourly wage reductions are calculated by comparing the average annual salary (or hourly wage if applicable) paid during the covered period (or Alternative Payroll Covered Period) to an to the average annual salary paid (or hourly wage if applicable) to such employee during the period January 1, 2020 to March 31, 2020.

While the Application does answer some of our questions, it does not answer all of them. We expect further interim rules to be issued by the SBA to further clarify the PPP loan forgiveness program.

Navigating through all of the information and programs available to impacted businesses may be overwhelming. KLR advisors are available to assist you navigate the best path forward during this unprecedented crisis. With a completely remote workforce our advisors are always available.

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