What You Need to Know About the SBA's New PPP Guidance
As of June 24, 2020, there have been a few critical updates to PPP loan forgiveness guidance and a few other clarifications on the EIDL loan requirements for refinancing. The Treasury and SBA released a new Interim Final Rule revision that clarified eligibility for borrowers, specifically relating to felony convictions and related charges. On the same day, the SBA published a Procedural Notice that shed much-needed light on how the EIDL loan and EIDL advance would be treated for borrowers who also obtained the PPP loan. Once again, there was clarification that the EIDL advance is not part of the amount required to be refinanced when a PPP loan is received, because it is not expected to be paid back.
On June 22, 2020, the Treasury and SBA released an updated comprehensive document: Business Loan Program Temporary Changes; Paycheck Protection Program—Revisions to Loan Forgiveness Interim Final Rule and SBA Loan Review Procedures Interim Final Rule. This document combines the materials from prior releases in one report. This IFR also provides the following updated guidance:
- Payroll Costs: For defining payroll costs eligible for loan forgiveness, additional clarification was provided in the situation where employees are not performing work but are still being paid wages by the borrower. Though payroll costs are generally incurred on the day the employee worked, the payroll costs are deemed incurred based on the regular schedule the employee would have performed the work.
- Non-Payroll Costs: More detailed guidance was explained for non-payroll costs, specifically utility bills that have a cut-off after the covered period but are for service during the covered period. A portion of the utility bill for service up to the covered period will be eligible.
- Covered Period Examples: Two more detailed examples were provided to explain how a borrower may evaluate using the 24 weeks versus electing the 8-week period when wages were reduced during the covered period.
- Early Loan Forgiveness Application: Borrowers may apply early for loan forgiveness under the new guidance, but doing so removes a safe-harbor provision that allows them to restore wages by December 31, 2020 and avoid reduced forgiveness amounts.
To read more about the interim rules revisions, please read our article on the SBA Revises Paycheck Protection Program Interim Final Rules, where we cover these changes in more detail.
Need Assistance with PPP Loan Forgiveness?
As a reminder, two new loan forgiveness applications designed to implement the provisions in the PPP Flexibility Act were released. The new EZ application requires fewer calculations and less documentation than the revised full forgiveness application (FFA).
The EZ application can be used by borrowers in the following circumstances:
- Self-employed borrowers with no employees
- Employers who have not reduced salaries or wages by more than 25% and maintained FTE headcount
- Employers who have not reduced salaries or wages by more than 25% but due to reductions in business activity resulting from health directives related to COVID-19 were unable to maintain FTE headcount
The subject of forgivable PPP loans is still evolving. Our Aldrich team is ready to support you and your business through these processes and procedures. We are monitoring the PPPFA updates and guidance closely and we’re prepared to help you take steps to ensure you have the support you need.
If you have any questions about the PPP loan forgiveness calculation, application, rule or regulations, reach out to your Aldrich Advisor. We’ll be updating our COVID-19 Business Continuity Resource Center for a list of all PPP coverage.
Meet the Author
Partner + Director of Private Wealth Tax
Marcy Lantz, CPA, CSEP®
Aldrich CPAs + Advisors LLP
Marcy joined Aldrich CPAs + Advisors in 1995 and has worked with a wide range of clients, including closely-held businesses, private equity, and high-net-worth individuals. As the Director of Tax and Director of Estate Planning, Marcy has a special interest and expertise in wealth transfer planning and strives to deepen the relationship with her clients... Read more Marcy Lantz, CPA, CSEP®
- High-net worth individuals
- Closely-held businesses
- Certified Public Accountant
- Strategic tax planning and compliance
- Certified Specialist in Estate Planning (CSEP)
- Private-equity and financial lenders