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SBA Releases PPP Loan Forgiveness Calculator

    • Application and relevant guidelines released May 15th
    • SBA sought to clarify many ambiguous questions that have been raised since the PPP’s inception
    • Some areas of the forgiveness calculation remain opaque as the first wave of Covered Periods ends

The Small Business Administration (SBA) released the long-awaited application for Paycheck Protection Loan (PPP) recipients to use to make the case on why the funding that they received should be converted into a grant. The application, which contains 11 lines in total, improved guidance on the calculation methods, further clarified definitions of forgivable expenses, and listed various documents that will need to be submitted along with the application as support. Applications will need to be submitted to either the bank or alternative lender from which businesses received their PPP funds.

Below is a highlight of a few key areas:

    • Three-Part Calculation:
      • Step 1: Identify all payroll and qualifying non-payroll expenses for the covered eight week period (“Covered Period”)
      • Step 2: Reduce the forgiveness amount if you have either reduced pay for employees more than 25% or have not satisfied the full-time employee requirement of the PPP Loan conditions
      • Step 3: 75% Payroll Cost Test
    • Utilities: These expenses include “…electricity, gas, water, transportation, telephone or internet access, for which service began before February 15, 2020” as well as auto expenses that are usually part of the auto deductions on a business tax return.
    • Rent: This category was updated to include leases of personal and real property, including “…copiers, servers, autos, and other common items of personal property that are leased by a business…”
    • Calculation of Average FTEs: The SBA sets forth two alternative, acceptable methods to calculate the number of Average FTEs.
    • Documentation of Payroll Costs: The SBA is requiring each of the following forms of documentation as it relates to payroll:
      • Bank accounts or third party payroll service reports documenting cash compensation
      • Tax forms for periods that overlap with the Covered Period or the Alternative Payroll Covered Period
      • Payroll receipts, cancelled checks or account statements documenting the amount of employer contributions to employee health insurance and retirement plans

Small business owners will undoubtedly attempt to begin gathering this information concurrently with their efforts to keep their businesses afloat. One thing is clear: in the days and weeks ahead, additional guidance will be needed from the SBA to prevent widespread interpretation of these guidelines. For example, are the forgivable expenses during this period expenses that are accrued, incurred or both? Additionally, how will employers with different payroll frequencies (weekly, semi-monthly, etc.) accurately reflect their payroll costs in a manner that is consistent over the 56 day Covered Period?

To access the PPP Forgiveness Application and to follow the news as it develops from the SBA and Treasury, visit the DSJ COVID-19 Information Center for the latest.

Sincerely,

Stephen Jahelka
Chief Business Officer, Disaster Relief Consultant

Contact:
516-541-6549 | Email

 
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