The SBA has issued additional guidance on Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) forgiveness in the form of FAQs (Frequently Asked Questions). The FAQs also address the impact EIDL advance payments have on PPP loan forgiveness, as well as questions regarding what to do about the PPP loan amount that is not forgiven.
The information provided in the FAQs can be very complex. The 11 page SBA FAQ document can be accessed here.
It is important to note that there are still pending legislative measures, executive actions and regulatory changes that may impact these FAQs in the future.
The PPP forgiveness topics covered in this latest FAQ include:General Loan Forgiveness FAQs, such as: details of the application process; and whether you must make payments on the PPP loan prior to determining the forgiveness amount.
Loan Forgiveness Payroll Costs FAQs, such as: when payroll costs are paid or incurred relative to the actual Covered Period; is the gross or net payroll amount used to calculate cash compensation; how the payment of lost tips, commissions, bonuses or other forms of incentive pay qualify for loan forgiveness; what group health care expenses are considered payroll costs; what retirement contributions are eligible for forgiveness; how to determine the amount of owner compensation that is eligible for forgiveness.
Loan Forgiveness – Nonpayroll Cost FAQs, such as: costs relative to the Covered Period and Alternate Covered Period; interest on UNSECURED debt; recently renewed leases or refinanced mortgages payments; electricity supply charges vs. electricity distribution charges.
Loan Forgiveness Reduction FAQs, such as: calculation of full time equivalents (FTEs) if you offered to rehire the employees and they refused; if you use the May 1, 2019 – September 15, 2019 period to calculate your PPP amount, you must use the same period in 2020; how to calculate employees who made over $100,000; forgiveness if you reduce salaries or hourly wages; what forms of compensation the 25% wage reduction applies to.
The EIDL topics are all related to the relationship between an EIDL advances and PPP forgiveness:
The EIDL advance is deducted from the PPP forgiveness amount. The SBA determines the amount to be deducted and advises the lender.
If the PPP is not forgiven in full, the remaining balance must be repaid by the borrower. The bank you borrowed from will service the loan. The loan balance must be repaid by the maturity date (either two or five years, depending on when you got the loan.) If you are deemed to have been ineligible for a PPP loan, the SBA may seek immediate repayment of all of the PPP money, or other remedies.
If you got an EIDL advance in excess of your PPP amount, none of the PPP loan is forgivable. The repayment of that PPP loan is on the same schedule and subject to the same terms as above.
This continues to be a very complicated situation. We strongly recommend that borrowers consult with their accountants and attorneys before submitting a PPP forgiveness application.
Please feel free to contact Patrick Neale & Associates with your questions at 239-642-1485 or info@patrickneale.com.
Be safe and well,
Patrick Neale & Associates
www.patrickneale.com
The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this article does not create an attorney-client relationship between the reader and Patrick Neale & Associates. The reader should not act or refrain from acting based upon the information contained in this article without first contacting an attorney. The hiring of an attorney is a decision that should not be based solely upon advertisements or this article.