Updated PPP Forgiveness Application and Rules

As we’ve shared, the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) provides 100% federally guaranteed loans to small businesses where qualified businesses with fewer than 500 employees can receive 2.5 times one month’s total payroll.

If you’ve received a PPP loan, hopefully you’ve been following our tips on tracking your accounts and preparing for loan forgiveness

Here we’re sharing information about the updated application and rules for loan forgiveness.

Updated Loan Forgiveness Application and Alternative Loan Forgiveness Application

Here are the applications and instructions you’ll need from the SBA:

Loan Forgiveness Application

Loan Forgiveness Application Instructions

Alternative Loan Forgiveness Application

Alternative Loan Forgiveness Application Instructions

Which Application Do I Need?

You’ll most likely use the standard forgiveness application. You’d only need the alternative application if your business:

  • did not reduce salaries by more than 25% during the covered period and did not reduce the number of employees or the average paid hours of employees from January 1, 2020 to the end of the Covered Period (ignoring reductions from the safe harbor related to an inability to hire qualified employees, and reductions due to an employee refusing to accept a restoration of hours
  • did not reduce salaries by more than 25% during the covered period and was unable to operate during the covered period at the same level of business activity due to COVID-19 related safety requirements promulgated by the CDC, HHS, or OSHA

What Updates Were Made to the Forgiveness Application?

  • Alternative Payroll Covered Period applies to the 24-week covered period. The Alternative Payroll Covered Period may not extend beyond December 31, 2020.
  • Clarifies one of the new FTE reduction exceptions: A position will not be included in the calculation if the Borrower made a good-faith, written offer to rehire an employee who was employee on February 15, 2020 and the Borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020.
  • Changes the documentation required for FTEs from the average number of FTEs per month to the average number of FTEs per week.
  • Specifies that employer health insurance contributions on behalf of a self-employed individual, general partners, or owner-employees of an S-corporation should not be included in the health insurance expenditures calculation.
  • Specifies that employer retirement contributions on behalf of a self-employed individual, general partners, or owner-employees of an S-corporation should not be included in the retirement expenditures calculation.

Other PPP Updates to Be Aware of

Updates to the PPP Final Rule made on June 17, 2020 incorporated changes from the Paycheck Protection Flexibility Act that was made into law on June 5, 2020. Those changes include:

  • Increases the cap on individual employees’ salaries from $15,385 during the 8-week covered period to $46,154 during the 24-week covered period.
  • Increases the cap on owner compensation from $15,835 during the 8-week covered period, to $20,833 for a 24-week covered period.
  • The amount of loan forgiveness is capped by the full principal amount of the loan plus accrued interest.

OnePoint is the trusted source for franchise accounting questions for more than 20 years. Contact us today.