CLIENT ALERT: Paycheck Protection Program Loan Forgiveness Requirements

CLIENT ALERT: Paycheck Protection Program Loan Forgiveness Requirements 

You received your PPP Loan (“Loan”), now how do you maximize the amount to be forgiven? 

Here are some helpful tips:

  • Your eight-week Loan forgiveness period (the “Covered Period”) begins on the date the lender makes the first disbursement of the Loan to you
  • The amount of Loan forgiveness can be up to the full principal amount of the Loan plus accrued interest, but the actual amount of Loan forgiveness will depend, in part, on the total amount spent over the Covered Period and if the funds were used for Covered Expenses (described below) or not
  • To maximize Loan forgiveness, at least 75 percent of the amount forgiven must be attributable to payroll costs and not more than 25 percent of the forgiven amount may be for authorized non-payroll expenses
  • For the eight-week period commencing on the date the lender makes the first disbursement the following are eligible uses of your Loan funds to maximize forgiveness (“Covered Expenses”):
    • Payroll costs (as explained in more detail below)
    • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
    • Mortgage interest payments (excluding prepayments or principal payments) on any business mortgage obligation on real or personal property incurred before February 15, 2020
    • Business rent payments on lease agreements in force before February 15, 2020
    • Business utility payments (gas, electric, water, telephone, internet access, transportation) for which service began before February 15, 2020
    • If you received an SBA EIDL and used it for payroll costs, your Loan must be used to refinance your EIDL.  Proceeds from any advance up to $10,000 on the EIDL will be deducted from the Loan forgiveness amount
    • If you use the Loan proceeds for anything other than Covered Expenses in the percentages discussed above, your forgiveness amount will likely decrease.  Other aspects during the Covered Period that might affect your Loan forgiveness are:
      • Number of Staff: Your Loan forgiveness may be reduced if you decrease your employee headcount
      • Level of Payroll: Your Loan forgiveness may be reduced if you decrease salaries and wages by more than 25% for any employee that made less than or equal to $100,000 annualized in 2019
      • Re-Hiring: You have until June 30, 2020 to restore your employee headcount and salary/wage levels for any reductions made between February 15, 2020 and April 26, 2020 – doing so could increase the amount of Loan forgiveness
      • Payroll Costs INCLUDE:
        • Compensation of employees (whose principal place of residence is in the United States) in the form of salary, wages, commissions or similar compensation
        • Cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips)
        • Payment for vacation, parental, family, medical, or sick leave
        • Allowance for separation or dismissal
        • Payment for the provision of group health care coverage, including insurance premiums
        • Payment of any retirement benefit
        • Payment of state and local taxes assessed on compensation of employees
        • If applying as an independent contractor or sole proprietor - wage, commissions, income, or net earnings from self-employment or similar compensation
        • Payroll Costs EXCLUDE:
          • Independent contractors have the ability to apply for a PPP loan on their own, so they do not count for purposes of your Loan calculation
          • Any compensation of an employee whose principal place of residence is outside of the United States
          • The compensation of an individual employee in excess of an annual salary of $100,000; prorated as necessary
          • Federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020, including the employee's and employer's share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees
          • Qualified sick and family leave wages for which a credit is allowed under the Families First Coronavirus Response Act
          • Applications for Loan forgiveness must be submitted to your lender that is servicing your Loan, and will need to include documentation verifying the following:

 The SBA is expected to issue further guidance relating to Loan forgiveness so be sure to keep an eye out for additional updates.

*The Attorneys at Levene Gouldin & Thompson, LLP are available to provide advice and counsel concerning these new statutory obligations and other matters related to COVID-19.




Connect With Us