PPP Loan Updates

The SBA released several items yesterday regarding PPP loans. Below is an outline of the items released and our key takeaways/changes with corresponding documents that you may find helpful.

  • FAQ’s on How to calculate loan amount for first draw PPP loans – this is mostly a refresher or prior guidance but clarified a couple of new items:
    • Can use either trailing 12 months, calendar 2019 or calendar 2020 payroll costs to determine loan amount
    • Can now capture group life, disability, vision and dental insurance within payroll costs
  • FAQ’s on How to calculate revenue reduction and loan amount for second draw PPP loans:
    • Guidance on gross receipts definition:
      • Cash or accrual basis based upon entity’s tax accounting method
      • PPP income excluded
      • Capital gains/losses excluded
      • 4797 ordinary gains/loss excluded
    • 25% decline from 2019 to 2020:
      • Can use full year or a calendar quarter to determine
      • Can use full year for fiscal filer only if their y/e is 1/31, 2/28 or 3/31; cannot use fiscal quarter
    • Can use calendar 2019 or calendar 2020 payroll costs to determine loan amount
    • 3.5x average monthly payroll costs for loan amount for Accommodation and Food Services Section (business activity code beginning with 72)
    • If borrower uses same lender and same payroll reference period (e.g. calendar 2019) to determine loan amount as first draw, nothing need be submitted to lender for second draw to substantiate payroll costs
  • Form 3508S and Instructions – Revised forgiveness form for loans $150,000 and less:
    • Applicable now for both first and second draw loans
  • Form 3508EZ and Instructions – Revised forgiveness form where there were no wage or employee reductions:
    • Applicable now for both first and second draw loans
    • Now captures four additional forgivable uses:
      • Covered operation expenditures
      • Covered property damage costs
      • Covered supplier costs
      • Covered worker protection expenditures
  • Form 3508 and Instructions – Revised forgiveness form:
    • Applicable now for both first and second draw loans
    • Now captures four additional forgivable uses:
      • Covered operation expenditures
      • Covered property damage costs
      • Covered supplier costs
      • Covered worker protection expenditures
  • Interim Final Rule for Forgiveness – Amended for the 12/27/20 bill provisions:
    • Clarified that FTE reductions can be eliminated by 12/31/20 or if loan was made after 12/27/20 – the last day of the loan’s covered period
    • Clarified that owner and employee compensation eligible for forgiveness is based upon number of weeks elected in the covered period (e.g. 8, 24 or something in between).  The maximum compensation amount for employees is $46,154 and owners is $20,833.
      • For an owner the range is between $15,385 and $20,833 and if say 10 weeks is the chosen covered period, it would be $19,231 ($100,000/52*10).
      • For an employee the range is between $15,385 and $46,154 and if say 20 weeks is the chosen covered period, it would be $38,462 ($100,000/52*20).

Helpful Documents Regarding PPP Loan

Loan Forgiveness Applications and Instructions

Please contact us with questions regarding these changes to the Paycheck Protection Program.