Paycheck Protection Program Update - October 8th

There have been a couple of significant updates to PPP loan forgiveness in recent weeks. Although these updates may not apply to everyone's situation, we feel these items are important for everyone to be aware of.

APPLYING FOR FORGIVENESS BEFORE THE END OF THE COVERED PERIOD

If you would like to apply for forgiveness before your covered period ends, this is permitted, but there’s a catch: An 8- or 24- week covered period will still apply.

Whether your covered period is 8 weeks or 24 weeks, borrowers may apply for forgiveness before the end of the covered period. But doing so lowers the maximum eligible compensation.

For example, if a borrower exhausts its PPP funds for eligible expenses and chooses to apply for forgiveness 16 weeks after the start of the covered period, the covered period would still be 24 weeks and compensation maximums for employees would be prorated to $30,769 ([16 ÷ 24 × $46,154]), less than the compensation maximum for employees of borrowers with a 24-week covered period.

Additionally, any salary or wage reduction would be extrapolated to the full covered period. Here's an example:

If Employee A’s rate of pay was reduced from $25 per hour during the first quarter of 2020 to $15 per hour during the covered period, with an average of 40 hours worked per week, the full wage reduction would be $3,600. Here’s how that reduction is calculated:

1. Any employee with pay that was reduced more than 75% of the 2020 quarter 1 rate of pay, would incur a salary or wage reduction:

a. 75% of $25 per hour = $18.75.

b. The pay Employee A received during the covered period of $15 per hour is $3.75 less than $18.75.

2. Since Employee A is hourly, borrowers will need to calculate the average number of hours worked per week between Jan. 1 and March 31, 2020.

a. Assume for this example, the average number of hours worked per week is 40.

3. To calculate the salary/wage reduction, which will lower a borrower’s loan forgiveness, multiply the reduction by the average hours worked per week times the number of weeks in the covered period.

a. $3.75 salary/wage reduction × 40 hours × 24 weeks = $3,600.

We realize this is a bit complicated. If you are thinking of applying for forgiveness before your covered period ends and need help with these calculations, please let us know.

SBA REQUIREMENTS IN THE EVENT OF A SELL/TRANSFER

The SBA has released guidelines and procedures in the event that a PPP borrower transfers ownership of interest or assets.

We recommend talking to your lawyer if you would like to make a sale or transfer.

Here is a helpful chart that offers a summary of requirements depending on the nature of the transaction:

Let us know if you have questions. As always, we are here to serve you.