The SBA has issued more clarifications on the PPP… YES, it continues to get more complex. See the details below and please contact us if you have questions about how (and when) to best document, calculate and submit your Loan Forgiveness application.
We belong to a network of accounting firms that has developed comprehensive worksheets to make accurate PPP loan calculations and maximize forgiveness for our clients. It’s important to get the numbers right, but it’s just as important to make smart decisions to help your business recover quickly. Emerald Financial acts as an outsourced CFO to help small businesses fully understand their cash flow, tax implications, potential liability – all the financial considerations that should figure into your decisions.
Here are the most updated details on the PPP guidelines:
- PPP borrowers can now apply for loan forgiveness following the end of their eight-week covered period.
- Remember, the Last day on which a lender can obtain an SBA loan number for PPP is June 30, 2020.
- PPP’s maturity date is two years for PPP loans made before June 5, 2020 unless the borrower and lender mutually agree to extend the maturity of such loans to five years. Maturity of PPP loans is five years for PPP loans made on or after June 5.
- Are there any other restrictions on how I can use PPP loan proceeds? Yes. At least 60 percent of the PPP loan proceeds shall be used for payroll costs. For purposes of determining the percentage of use of proceeds for payroll costs (but not for forgiveness purposes), the amount of any refinanced EIDL will be included. The rationale for this 60 percent floor is contained in the First PPP Interim Final Rule and SBA’s interim final rule posted on June 11, 2020.
- What amounts shall be eligible for forgiveness? The actual amount of loan forgiveness will depend, in part, on the total amount spent over the 24-week period beginning on the date your PPP loan is disbursed (“covered period”).
- Include In Forgiveness: payroll costs including salary, wages, and tips, up to $100,000 of annualized pay per employee (for 24 weeks, a maximum of $46,154 per individual, or for eight weeks, a maximum of $15,385 per individual), as well as covered benefits for employees (but not owners), including health care expenses, retirement contributions, and state taxes imposed on employee payroll paid by the employer (such as unemployment insurance premiums);
- Included In Forgiveness: owner compensation replacement, calculated based on 2019 net profit as described in Paragraph 1.b. above, with forgiveness of such amounts limited to eight weeks’ worth (8/52) of 2019 net profit (up to $15,385) for an eight-week covered period or 2.5 months’ worth (2.5/12) of 2019 net profit (up to $20,833) for a 24-week covered period, but excluding any qualified sick leave equivalent amount for which a credit is claimed under 3 section 7002 of the Families First Coronavirus Response Act (FFCRA) (Public Law 116-127) or qualified family leave equivalent amount for which a credit is claimed under section 7004 of FFCRA.
- The Administrator, in consultation with the Secretary, has determined that it is appropriate to limit the forgiveness of owner compensation replacement for individuals with self-employment income who file a Schedule C or F to either eight weeks’ worth (8/52) of 2019 net profit (up to $15,385) for an eight-week covered period or 2.5 months’ worth (2.5/12) of 2019 net profit (up to $20,833) for a 24-week covered period per owner in total across all businesses.
- The Flexibility Act extended the length of the covered period as defined in section 1106 of the CARES Act from eight to 24 weeks.