On Friday May 15th, the SBA released the Paycheck Protection Program Loan Forgiveness Application. The highly anticipated application provides insight and direction for the loan forgiveness process. The application can be found on our web page. While the application will likely not answer all of the questions borrowers have, the eleven-page document includes the form, instructions and worksheets to help calculate the forgiveness amount. The application lists the supporting documentation that must be submitted with the application and additional documents that each borrower must maintain in their records. Here are some of the new developments included in the application:
- “Alternative Payroll Covered Period” Defined: Flexibility has been provided for borrowers as the application provides for an election to calculate payroll costs using an “alternative payroll covered period”. The period would begin on the first day of the borrower’s first pay period after disbursement of the loan, rather than the first day of disbursement.
- Average FTE is outlined: Average full-time equivalency (FTE) is clarified as an employee who works for 40 hours or more per week. Additionally, an election can be made by a borrower to use 1 FTE for employees working 40 hours or more a week and 0.5 FTE for employees who work fewer hours.
- Additional FTE reduction exception: The application provides for several exceptions from the reduction of loan forgiveness for a borrower who has made a “good-faith, written offer to rehire an employee” that was rejected, an employee who was fired for cause, voluntarily resigned or voluntarily requested and received a reduction of hours.
- Six year Statute of Limitations: Borrowers must retain all documentation associated with the loan application, certification as to necessity for the loan request, the loan forgiveness application and documentation showing material compliance with PPP requirements for six years after the date the loan is forgiven or repaid in full.
The SBA also stated Friday that regulations and guidance are forthcoming soon to further assist borrowers as they complete their applications.
Please reach out to your Henry+Horne professional for further insight on how these aspects of the application process affect your individual situation. For more information and resources on COVID-19, see our coronavirus page.
Phillip R. McCollum, Jr., CPA