On May 16, 2020, the Small Business Administration (SBA) released the Paycheck Protection Program (PPP) Loan Forgiveness Application. In addition to providing step-by-step instructions for calculating your forgiveness amount, the application also clarifies several key items outlined below. We encourage you to reach out to your Cerity Partners advisor to learn more.
The requested forgiveness amount must meet the following criteria (outlined in the Representations and Certifications section of the application):
According to the application, you may be able to calculate your eight-week period using the first day of the payroll period following your loan disbursement instead of the loan disbursement date. For example, if a business owner received their PPP loan proceeds on April 20, and April 26 is the first day of the pay period following the disbursement, the first day of the Alternative Payroll Covered Period is April 26. The last day of the Alternative Payroll Covered Period is June 20.
The work week definition for full-time employees (FTE) is 40 hours, not the SBA’s 30 hour work week. The FTE reduction exceptions that will not count against forgiveness include employees who:
Additionally, there is no FTE reduction if the number of employees or average paid hours was not reduced between January 1, 2020 and the end of the eight-week period.
This calculation is computed on an employee-by-employee basis. It also excludes anyone who earned more than $100,000 annualized during any pay period in 2019. For example, if a weekly employee received more than $1,923.08 in any 2019 pay period, they are excluded from the wage reduction calculation.
On the application, you will need to certify that your tax documents are consistent with your federal and state tax filings. For example, the Schedule C that a business owner submits with their loan forgiveness application must match the one they filed for tax purposes.
Even though the loan forgiveness process has begun, more guidance regarding PPP is expected. We’re closely monitoring the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act. The bill contains several provisions related to PPP, including:
Navigating the nuances of the Paycheck Protection Program can be challenging. We understand these nuances and can guide you through the process to help maximize your loan forgiveness. Contact us to learn more.
Get the latest insights and analysis from our investment team delivered right to your inbox.