Apple Growth Partners

Release of SBA Paycheck Protection Program Loan Forgiveness Application

Monday, May 18, 2020

By Kathy Davis, CPA | COVID-19 Response Team

On May 15th, the SBA released the application that borrowers must use to determine the amount of the loan that may be “forgiven” by their lender.  There are still unknown items, for which we expect additional guidance, but we will highlight a few modifications just released.

  • SBA added an Alternative Payroll Covered Period – Finally, they recognized the difficulties in getting our payroll period to match the 56-day forgiveness period and the issues involved in getting the full payroll incurred and paid.
    • You will be permitted to choose an “alternative payroll covered period,” which is the 8 weeks beginning on the first day of the first pay period following the loan disbursement date.
    • In the SBA example:
      • Loan received 4/20
      • The first day of your next pay period was 4/26/20
      • You may count your payroll costs for the 8-week period beginning 4/26/20
    • The “Alternative Payroll Covered Period” is ONLY APPLICABLE to payroll costs.
  • For non-payroll costs such as mortgage interest, rent, and utilities, to qualify for forgiveness, these expenses must either be:
    • Paid During the 8-week covered period
    • OR
    • Incurred during the 8-week period and paid by its next regular due date, even if that due date is outside the 8-week period.
  • SBA finally defined how we will calculate “Full-Time Equivalents, aka FTE.” Unfortunately, it is unlike how FTE is normally counted in typical ACA reporting or retirement plan reporting.

To determine the average full-time equivalent employee (FTEs) for the 8-week covered period (or the alternative payroll covered period, if elected);

  • Determine the average number of hours worked per week and divide by 40, rounding to the nearest tenth.  The maximum amount for each employee is 1.0,
  • OR
  • You may use 1.0 for every employee who worked 40 hours a week and .5 for every employee that did not work 40 hours a week.

(No guidance was given if your normal workweek is less than 40 hours. For now assume, anyone working the full schedule equals 1.0)

  • Additional guidance is provided on what will need to be submitted with the application for forgiveness, and what additional records the borrower will need to maintain.

Although there is much discussion and anticipation regarding a change to when the forgiveness period starts, we will work with what information we have and keep pushing the information to our clients.  We are updating our forgiveness calculator and will be sending out more specific guidance.  We will be scheduling webinars on all the updates in the last release for the forgiveness application completion.  One thing we’ve learned, this is an on-going process, so we’ll keep dealing with the curves they throw, with our main objective of receiving the maximum forgiveness.

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