PPP Loan Forgiveness Application + Highlights

PPP Loan Forgiveness Application + Highlights

The Small Business Association has released the Paycheck Protection Program (PPP) Loan Forgiveness Application – the form businesses must use to request partial or full forgiveness of a PPP loan. Unfortunately, the form doesn’t offer very much guidance. The SBA has stated there will be more information released this week to address unanswered questions. Here is the link to the application known as SBA Form 3508; highlights are below.

  • Alternative payroll covered period – you can choose to have the 8 week covered period more closely match your actual payroll periods. So if your payroll cycle didn’t start on the same day you received the funds (which is probably the case), you can pick the “alternative payroll covered period”.
  • 75/25 requirement – most people were hoping that they would relax the rule that at least 75% of the forgiven loan amount had to be for payroll costs. But this application doesn’t indicate any changes to that rule. It is possible that may still change – but nothing yet.
  • Limits on increase in wages for owners – many business owners increased their own pay for the 8 week period – but the application indicates that owner compensation is limited to the owner’s average wages for 2019. There are still a lot of questions on how this will work in practice (how is this average calculated, does that include the owner’s spouse or kids, etc.) – but it is something to keep in mind.
  • Owner-employees not included in FTE calculation to determine if the business has reduced headcount. We aren’t sure if this includes the spouse or children of an owner – since there are some businesses who hired a relative to replace a dismissed employee to maintain the same headcount.
  • FTE defined – many people believed the FTE calculation would use a 30 hour work week, but the application uses a 40 hour week. So an employee who didn’t work 40 hours per week on average is considered part-time and needs to be calculated as a partial FTE. There is a simplified formula for any part-timers to be considered half of a FTE.
  • Reduction in wages – since loan forgiveness is reduced if you reduce any individual employees wages, there were a lot of questions about how that would work if you didn’t rehire the same people. Luckily, it looks like this reduction is only calculated on people who were paid during the 8 week covered period. So if you replaced one employee with another, or combined multiple part-timers with one full-timer, it doesn’t appear that will limit your forgiveness.

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