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PPP – Loan Updates

The US Treasury and Small Business Administration (SBA) have posted various updates to the PPP loan program over this week.  These updates integrate the new Paycheck Protection Program Flexibility Act of 2020 (PPPFA) with previously issued guidance.  You can find more information about this act HERE.  Highlights of the new provisions are noted below.  As always, please contact TBC with any questions or concerns.

New Applications

The SBA has posted a revised PPP forgiveness application to reflect the PPPFA changes along with a new streamlined EZ application. Most notably, the EZ application may be used for borrowers who meet any of the following criteria:

  1. A sole proprietor without employees.
  2. A borrower meeting the following criteria:
    1. The borrower did not reduce annual salary or hourly wages of any employee by more than 25% between the covered period and 1/1/2020 to 3/31/2020, AND
    2. The borrower did not reduce the number of employees or the average paid hours of employees between 1/1/2020 and the end of the covered period.  This calculation ignores reductions related to the inability to rehire or refusal to work by an employee.
  3. A borrower meeting the following criteria:
    1. The borrower did not reduce annual salary or hourly wages of any employee by more than 25% between the covered period and 1/1/2020 to 3/31/2020, AND
    2. The borrower is unable to operate during the covered period at the same level of business activity as before 2/15/2020, due to compliance with HHS, CDC, or OSHA related to the maintenance of standards of sanitation, social distancing, or other work or safety requirement.

PPP-Forgiveness-Application-3508EZ

PPP-Loan-Forgiveness-Application-Form-EZ-Instructions

3245-0407-SBA-Form-3508-PPP-Forgiveness-Application

PPP-Loan-Forgiveness-Application-Instructions

Changes in provisions

The following details have been changed or confirmed with the updated guidance.

  1. FTE Safe harbor calculation – the Full time equivalent employee count must be restored to the 2/15/2020 level by the earlier of 12/31/2020 or the date of the forgiveness application for the safe harbor to apply. Previously the restoration date was 6/30/2020.
  2. Owners – Owner compensation is maxed at $20,833 (or $15,384 for those borrowers who elect the 8 week period).  This is inclusive of retirement and health insurance.  The additional limit of total forgivable compensation can’t exceed 2.5/12 of 2019 amounts still applies.
  3. A sole proprietor without employees will get full forgiveness.
  4. Employee max compensation will be $46,154 (24 weeks of annualized 100,000) plus health, retirement, and state unemployment.  If the client elects the 8 week rule, then the max is still $15,385.
  5. Owner compensation replacement (self-employed individuals) for the 24 week period is $20,833 (2.5 months/12months) and for the 8 week period $15,385.

Other Considerations

Elected 8 week Period vs 24 Week Period

A borrower that received a PPP loan prior to June 5, 2020 may elect to use an 8 week covered period instead of the new 24 week period. While the 24 week period allows borrowers to spread eligible costs throughout a longer period thereby increasing their total forgiveness amounts (subject to limitations), borrowers should consider whether the 8 week period may be more advantageous for other reasons. Certain reasons may include:

    1. PPP loan proceeds have been spent, or are expected to be spent, throughout the 8 week period.
    2. Borrowers have maintained FTE levels throughout the 8 week period (i.e., did not reduce salary or headcount during the 8 week period) but are uncertain whether FTE levels can be maintained for the remainder of 2020.
    3. More information is required to calculate FTE levels under the 24 week period.

Disclaimer: This post was current as of the date of posting.  Any changes made to the law or regulations since original posting has not been incorporated.  Please view the recent postings for current information or contact us directly with any questions.

Teal, Becker & Chiaramonte Certified Public Accountants