Early Insights on the PPP Loan Forgiveness Application
On May 15, 2020, The Small Business Administration (“SBA”) in conjunction with the Department of the Treasury released the Paycheck Protection Program (“PPP”) Loan Forgiveness Application along with detailed instructions.
The application is thorough, resembles a tax return to a degree and has four parts:
- The PPP Loan Forgiveness Calculation Form
- Schedule A
- Schedule A worksheet, and
- Borrower Demographic information (which is optional)
Every PPP borrower is required to complete the application and submit it to their lender when it’s time to apply for loan forgiveness. Some highlights of the application include:
- Introduction of an Alternative Payroll Covered Period allowing borrowers to align the eight-week Covered Period for payroll to their normal payroll schedule, if elected
- Flexibility to include eligible expenses incurred or paid during the Covered Period
- Clarification that covered rent or lease obligations include personal and real property
- Instructions insinuate there will not be a 75% cliff rule (all or nothing) for loan forgiveness. For example, if at least 75% percent of the PPP is not used for payroll costs, it appears the borrower would still be eligible for forgiveness to a certain extent.
- A simplified formula for the calculation of Full-Time Equivalent (FTE) employees
- New borrower friendly FTE reduction exemptions and safe harbors
- Borrower friendly updates to the calculations and potential limitations with wage/salary reductions
- Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined; and reductions related to any employees who during the Covered Period or the Alternative Payroll Covered Period (a) were fired for cause, (b) voluntarily resigned, or (c) voluntarily requested and received a reduction of their hours.
This information is a good start, however, questions remain and more guidance is needed to complete an accurate application. We expect more guidance to come any day from the SBA and Treasury; when further information is released, Sykes & Company, P.A. will be there to help you navigate this process.
We are continuing to monitor these issues, so stay informed through our COVID-19 Advisory Updates.
If you have specific questions, just go to ASK SYKES. We are ready to find your answers. Sykes & Company, P.A. has a team in place to help your pharmacy maximize loan forgiveness.