Jun 18, 2020
Interim SBA Ruling
On Tuesday, June 16 the SBA filed its 19th Interim Final Rule (IFR) focused on revisions made from Paycheck Protection Program Flexibility Act (Flexibility Act) signed into law on June 5th.
Notable provisions in the unpublished document include:
- The newest guidance shows how to calculate owner compensation. For Borrowers using a 24-week Covered Period, this amount is capped at $20,833 (the 2.5-month equivalent of $100,000 per year) for each individual or the 2.5-month equivalent of their applicable compensation in 2019, whichever is lower. For Borrowers using an 8-week Covered Period, this amount is capped at $15,385 (the eight-week equivalent of $100,000 per year) for each individual or the eight-week equivalent of their applicable compensation in 2019, whichever is lower. While the guidance is somewhat unclear, this cap appears to apply to owners of all entity types, and at any level of ownership.
- The payroll requirement was reduced from 75% to 60%.
- Lastly, the loan forgiveness amounts for non-payroll expenses have also been extended to 24 weeks, making it much easier to meet loan forgiveness thresholds.
EZ Version Loan Application
In addition, the SBA also released two new applications: a revised full-loan application and the new EZ Forgiveness Application. The agency says the EZ version “requires fewer calculations and less documentation” and reduces the burden for smaller recipients, like self-employed individuals and sole proprietors. This new EZ application applies to borrowers that:
- Are self-employed and have no employees; OR
- Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
- Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%”.
Economic Injury Disaster Loan (EIDL) Re-opened
The SBA recently re-opened the Economic Injury Disaster Loan (EIDL) and EIDL Advance program portal to all eligible applicants experiencing economic impacts due to COVID-19. Businesses with 500 or fewer employees are generally eligible. The loan process is streamlined and is completed online directly through the SBA. Loan amounts are determined by the SBA and can be up to $2 million with repayment terms up to 30 years and an interest rate of 3.75% (2.75% for non-profits). Additionally, you can request an advance on the loan, which will be awarded as $1,000 per employee, up to a total of $10,000.
As always, should you have questions or concerns about your specific situation, please contact your William Vaughan Company advisor. Additional resources can be found on our WVC COVID-19 Resource Center. Finally, stay tuned for an updated version of our WVC PPP Loan Forgiveness calculator which will reflect this updated guidance.
The Treasury Department and Small business Administration’s (SBA) Latest Guidance, Loan Forgiveness Application and the WVC Forgiveness Calculator
May 26, 2020
On May 15, the SBA released its Loan Forgiveness Application for the Paycheck Protection Program. The application outlines the computation for debt forgiveness. While there are still many questions that need to be addressed, the guidance helped clarify some larger items:
- The first day of the Covered Period for your PPP loan must be the same as the PPP Loan Disbursement Date and extends over the 56-day Covered Period. Borrowers with biweekly or more frequent payroll periods may elect to use the Alternative Payroll Covered Period that begins on the first day of their first pay period following the date when you receive the loan proceeds.
- Payroll costs that have either been paid or incurred in the 56-day Covered Period are both eligible for forgiveness. If a cost is incurred and paid in the Covered Period, it will only be counted one time toward the forgiveness calculation.
- Eligible Nonpayroll for forgiveness consist of:
- covered mortgage obligations: payments of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property incurred before February 15, 2020 (“business mortgage interest payments”);
- covered rent obligations: business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020 (“business rent or lease payments”); and
- covered utility payments: business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020 (“business utility payments”).
- Under the SBA’s guidance, the total amount of cash compensation eligible for forgiveness for each individual employee cannot exceed an annual salary of $100,000, as prorated for the Covered Period; that is, it cannot exceed $15,385.
All guidance on the Loan Forgiveness Application can be found here. While we are expecting more guidance from the SBA, we advise our clients to keep careful and detailed records and documentation throughout this process to maximize forgiveness.
William Vaughan Company is working diligently to update our Forgiveness Calculator to meet the latest SBA guidance. We will be sending you the latest version as soon as possible. Keep an eye out for our email. If you do not already receive our timely communications, please subscribe to WVC Insights here.
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