The end of last week was busy once again in regards to additional Paycheck Protection Program (PPP) guidance and we want to keep you apprised of several updates regarding the program. Our team is available to answer any questions pertaining to the information noted below or any other matters pertaining to recent stimulus legislation.

Loan Forgiveness Application
The Small Business Administration (SBA) published a Loan Forgiveness Application to be used by borrowers to apply for loan forgiveness under the PPP. Once eligible to apply for loan forgiveness, borrowers are instructed to submit this application (or an electronic copy made available by the lender) to their lender.
The RS&F team has been reviewing the Loan Forgiveness Application and will be available to assist clients as they complete it once eligible to do so. A few points of note:

As PPP loan borrowers are likely aware, funds must be spent within an eight week ‘Covered Period’ beginning on the date the borrower received funds from their lender. However, an ‘Alternative Payroll Covered Period’ was added to the application and pertains to an election borrowers may make in calculating their payroll costs. This was added for administrative convenience and permits borrowers to calculate payroll costs using the eight week period that begins on the first day of their first pay period following the PPP loan disbursement.
‘Eligible payroll costs’ has been further defined and payroll costs incurred but not paid during a borrower’s last pay period in their Covered Period are eligible for forgiveness if they are paid on or before the regular payroll date immediately after the end of the Covered Period.
Similar to eligible payroll costs, eligible nonpayroll costs must be paid or incurred during the Covered Period and must be paid on or before the next regular billing date after the end of the Covered Period.
For covered rent obligations, this may include business rent or lease payments for real or personal property in force before February 15, 2020.
The Application notes an FTE Reduction Safe Harbor that applies to borrowers who restore their FTE (full-time equivalency) levels by June 30, 2020 to FTE employee levels that which existed during the pay period that included February 15, 2020.
The Application references supporting documentation that must be used to substantiate payroll and nonpayroll costs for which borrowers seek forgiveness.

Since lenders will be the institutions through which loan forgiveness will be reviewed and granted, we strongly encourage clients to discuss their lenders’ process for approving loan forgiveness. While the Application provides a standard that should be used by all lenders, each institution will likely set up a unique process for their clients. Since this guidance was just released, it may take some time for lenders to determine their internal loan forgiveness process. Therefore, we suggest following the strict guidance from the Application until lenders clarify their process and/or the SBA provides additional guidance to borrowers.

Loan Increases

The SBA previously issued guidance that permits borrowers to include self-employment income of general active partners in a partnership in their PPP loan calculations. However, many borrowers had already been approved for PPP loans and did not borrower full amounts for which they were eligible. Therefore, the SBA released an Interim Final Rule that provides guidance regarding loan increases for borrowers that did not previously maximize their loan proceeds.

Borrowers wishing to increase their loan proceeds under this ruling may request that their lender submit a request to the SBA to increase the loan amount by the partner compensation (with supporting documentation). Similar to other payroll costs, the additional loan proceeds to account for partner compensation is limited to an annualized amount of $100,000. Even if a borrower doesn’t receive a loan increase, they may include allowable partner compensation in their payroll costs for purposes of calculating loan forgiveness. This guidance does not change any other loan terms or a borrower’s Covered Period.

Due to both bank compliance requirements for the PPP and also existing borrower Covered Period timelines, such loan increase requests should be requested as soon as possible from a borrower’s lender.

As a reminder, RS&F is able to assist clients to determine loan forgiveness. Please contact your RS&F Client Advisor for assistance with PPP loan forgiveness or other program questions.

This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.