Further Guidance Related to Loan Forgiveness

Summarized below are key points from the latest Interim Final Ruling (IFR), released by the Small Business Association on June 22, 2020, related to loan forgiveness.  In addition, members from our COVID-19 Task Force will be pre-recording “Coffee & a Conversation: The Latest On Loan Forgiveness.”  If you have questions you want answered during the conversation please email them to sweaver@teamdkb.com.  Access to the recorded conversation will be available early next week.

Key Points:
  • Applicants may submit application before the end of the covered period if PPP loan funds are exhausted prior to the end of the 24 week covered period.  It is implied that the FTE computation will be computed based on the beginning of the covered period through the date of application, however borrowers must pro-rate any wage/salary reductions for the full amount of the covered period.
  • Clarification is given that payroll costs paid AND/OR incurred during the covered period are eligible.  Payroll costs that are incurred during the covered period just need to be paid by the next regular pay period.
  • Clarification is given that direct and indirect compliance with COVID including government shutdown orders may qualify businesses for the full time equivalent employee reduction safe harbor but they must have documentation including copies of the COVID Requirements/Guidance for each location and relevant borrower financial records proving a reduction in business activity
  • Clarification is given to the role of the lender’s review in the application process and emphasis is placed on the fact that providing an accurate calculation of the forgiveness amount is the responsibility of the borrower
  • Clarification is given that if the forgiveness application is denied for any reason, loans will be required to be repaid based on the repayment schedule
  • The owner compensation cap is discussed as “payroll costs,” and it is clear that owner compensation is capped at the lesser of $20,833 or 2.5 months of 2019 compensation (which is determined differently based on type of entity), and DOES include benefits.  This is different from the cap on employee payroll costs, as the prorated $100k cap only applies for cash compensation for employees.
We are constantly watching for new developments and will inform you if anything else arises.  In the meantime if you have any questions or need clarification please contact a member of our COVID-19 Task Force at hello@teamdkb.com or visit our COVID-19 Resource Center.