For more information, access the full Aug
Forgiveness reductions for reductions in employee salary or hourly wage: SBA previously established that unless certain safe harbors were met, “if the salary or hourly wage of a covered employee is reduced by more than 25% during the Covered Period or the Alternative Payroll Covered Period, the portion in excess of 25% reduces the eligible forgiveness amount.” The FAQ provides three thorough examples for determining these reductions, and also notes that for purposes of this calculation, the borrower should take into account decreases only in salaries or wages, not all forms of compensation.
Eligibility for the EZ application form: SBA confirmed that “sole proprietors, independent contractors, and self-employed individuals who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the Borrower Application Form” automatically qualify to payday loans in Eastlake OH – and should – use the simplified Loan Forgiveness Application Form 3508EZ (or their lender’s equivalent).
Electronic signatures and documentation: PPP lenders are allowed to accept scanned copies of signed loan forgiveness applications, as well as of documents containing the information and certifications that the application requires. They also may accept “any form of E-consent or E-signature that complies with the requirements of the Electronic Signatures in Global and National Commerce Act (P.L. 106-229).” SBA advises that “if electronic signatures are not feasible, then when obtaining a wet ink signature without in-person contact, lenders should take appropriate steps to ensure the proper party has executed the document.” (SBA cautions, however, that “This guidance does not supersede signature requirements imposed by other applicable law, including by the lender’s primary federal regulator.”)
During the time between loan disbursement and SBA remittance of the forgiveness amount, interest will accrue, and the borrower is responsible for paying that interest on any unforgiven amount of the loan
Loan payments prior to SBA remitting the forgiveness amount: “As long as a borrower submits its loan forgiveness application within ten months of the completion of the Covered Period, the borrower is not required to make any payments until the forgiveness amount is remitted to the lender by SBA,” the FAQ states. “The lender is responsible for notifying the borrower of remittance by SBA of the loan forgiveness amount (or that SBA determined that no amount of the loan is eligible for forgiveness) and the date on which the borrower’s first payment is due, if applicable,” the FAQ states.
Appealing an SBA ount: In mid-August, SBA released an interim final rule establishing guidelines for appealing SBA decisions that a borrower was ineligible for all or part of the amount approved (or not approved) by their lender. Read our full alert for details.
4 FAQ or the Aug. 24 interim final rule, or contact our PPP Loan Forgiveness Assistance team for guidance specific to your business and needs.
If the loan is fully forgiven, the borrower is not responsible for any payments; if only a portion is forgiven, or if the forgiveness application is denied, any remaining balance due must be repaid on or before the maturity date of the loan
- See the “Owner compensation” section below for treatment of retirement benefits for owners.
- “S Corporations: The employee cash compensation of an S-corporation owner-employee, defined as an owner who is also an employee, is eligible for loan forgiveness up to the amount of 2.5/12 of their 2019 employee cash compensation, with cash compensation defined as it is for all other employees. Borrowers are also eligible for loan forgiveness for payments for employer state and local taxes paid by the borrowers and assessed on their compensation, and for employer retirement contributions to their employee retirement plans capped at the amount of 2.5/12 of their 2019 employer retirement contribution. Employer contributions for health insurance are not eligible for additional forgiveness for S-corporation employees with at least a 2% stake in the business, including for employees who are family members of an at least 2% owner under the family attribution rules of 26 U.S.C. 318, because those contributions are included in cash compensation. The eligible non-cash compensation payments should be included on lines 7 and 8 of PPP Schedule A of the Loan Forgiveness Application (SBA Form 3508), for borrowers using that form, and do not count toward the $20,833 cap per individual.
- Also, in cases where a borrower shares a rented space with another business, “When determining the amount that is eligible for loan forgiveness, the borrower must prorate rent and utility payments in the same manner as on the borrower’s 2019 tax filings, or if a new business, the borrower’s expected 2020 tax filings.”
- Seasonal employers: Seasonal employers that elect to use a 12-week period between , to calculate their maximum PPP loan amount must use the same 12-week period as the reference period for calculation of any reduction in the amount of loan forgiveness.