Part 14 – Loan Forgiveness Application

Key Items Clarified but More Guidance To Come

On May 15, 2020, the SBA released the Paycheck Protection Program Loan Forgiveness Application. The good news is that it does provide some clarity. However, it also triggers more questions which are still yet to be addressed. Here are a few important matters that are included:

  • The “incurred” and “paid” language in §1106 of the CARES Act regarding expenses that count for forgiveness is defined to allow, with certain limitations, both expenses paid and incurred in the 8-week period.
  • The creation of a new Alternative Payroll Covered Period (APCP) allowing borrowers with a bi-weekly or more frequent payroll to align the 8-week period with first day of the first pay period following the disbursement of PPP loan proceeds.
  • For example, if you received your loan proceeds on April 20th and the first pay period following your PPP loan disbursement is April 26th, you could elect to start your 8-week pay period on April 26th (the first day of the first pay period following the receipt of the loan).

The 75% requirement for payroll costs is based on the potential forgiveness amount and not the total loan proceeds.

  • Generally only payroll related items will be allowed to use the APCP, while all other expenses will continue to refer to the 8-week period beginning on the date the loan proceeds are deposited in the borrowers account.
  • Rent obligations include leases on both real and personal property.
  • Owners or self-employed partners compensation is capped at $15,391 per partner ($16,666 less the partnership entity’s share of self-employment tax) for the 8-week period.
  • Utilities includes electricity, gas, water, transportation, telephone and internet access in service before February 15, 2020.
  • Interest includes payments of interest on real estate or personal property debt in place before February 15, 2020.

For your convenience we’ve included a link to see the full SBA 11-page PPP Loan Forgiveness Application in which includes the schedule, calculation form, worksheet and instructions (click here).

We will keep you updated as guidance from the SBA continues to evolve.

If you have questions, contact your BKMSH team member.