You have the choice to apply for forgiveness after 8 WEEKS or 24 WEEKS. You can still apply for forgiveness after 8 weeks.
Completed form should be submitted to your bank after the chosen period expires from your loan origination. There is still expected guidance to come from the SBA to help clarify the Forgiveness Application process.
1. TIME FRAME OF 8 WEEKS OR 24 WEEKS
The application allows for you to decide if your Covered Period will be the date of your PPP Loan Disbursement date OR the start date of your next pay period AFTER the PPP Loan Disbursement, which is the Alternative Payroll Covered Period.
EXAMPLE:
- COVERED PERIOD > PPP Loan Disbursement date 4/17/20 > 4/17/20 to 6/12/20
- ALTERNATIVE PAYROLL COVERED PERIOD > PPP Loan Disbursement date 4/17/20 (*falls in middle of a pay period) > next pay period starts 4/27/20, making covered period 4/27/20 – 6/22/20
2. PAY PERIOD OR PAY DATE FOR TRACKING EXPENSES?
Based on the application, page 2: Summary of Costs Eligible for Forgiveness
Eligible payroll costs. Borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the Covered Period (or Alternative Payroll Covered Period) (“payroll costs”). Payroll costs are considered paid on the day that paychecks are distributed or the Borrower originates an ACH credit transaction. Payroll costs are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date. Otherwise, payroll costs must be paid during the Covered Period (or Alternative Payroll Covered Period). For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the covered period. Employer owners are still capped at $15,385. Count payroll costs that were both paid and incurred only once. For information on what qualifies as payroll costs, see Interim Final Rule on Paycheck Protection Program posted on April 2, 2020 (85 FR 20811).
3. FULL TIME EQUIVALENT EMPLOYEES (FTE)
In addition to summarizing your payroll costs for the PPP Loan, you also may need to calculate and provide documentation for any reduction in headcount in FTEs. If you have NOT reduced your FTEs, then you will just check off that you have NOT reduced the number or employee or average paid hours and enter 1.0. The application will require you to go through your employees to come up with two calculations that may reduce your loan forgiveness.
Average FTE: This calculates the average full-time equivalency (FTE) during the Covered Period or the Alternative Payroll Covered Period. For each employee, enter the average number of hours paid per week, divide by 40, and round the total to the nearest tenth. The maximum for each employee is capped at 1.0. A simplified method that assigns a 1.0 for employees who work 40 hours or more per week and 0.5 for employees who work fewer hours may be used at the election of the Borrower.
Salary/Hourly Wage Reduction: This calculation will be used to determine whether the Borrower’s loan forgiveness amount must be reduced due to a statutory requirement concerning reductions in employee salary and wages. Borrowers are eligible for loan forgiveness for certain expenditures during the Covered Period or the Alternative Payroll Covered Period. However, the actual amount of loan forgiveness the Borrower will receive may be less, depending on whether the salary or hourly wages of certain
employees during the Covered Period or the Alternative Payroll Covered Period was less than during the period from January 1, 2020 to March 31, 2020. If the Borrower restored salary/hourly wage levels, the Borrower may be eligible for elimination of the Salary/Hourly Wage Reduction amount. Borrowers must complete this worksheet to determine whether to reduce the amount of loan forgiveness for which they are eligible. Complete the Salary/Hour Wage Reduction column only for employees whose salaries or
hourly wages were reduced by more than 25% during the Covered Period or the Alternative Payroll Covered Period as compared to the period of January 1, 2020 through March 31, 2020.
4. FTE REDUCTION EXCEPTIONS & SAFE HARBOR
You may be able to avoid any loan forgiveness reduction if the following apply to your FTEs at the end of the covered period.
EXCEPTIONS: (1) any positions for which the Borrower made a good-faith, written offer to rehire an employee during the Covered Period or the Alternative Payroll Covered Period which was rejected by the employee; and (2) any employees who during the Covered Period or the Alternative Payroll Covered Period (a) were fired for cause, (b) voluntarily resigned, or (c) voluntarily requested and received a reduction of their hours. In all of these cases, include these FTEs on this line only if the position was not filled by a new employee. Any FTE reductions in these cases do not reduce the Borrower’s loan forgiveness.
SAFE HARBOR: A safe harbor under applicable law and regulation exempts certain borrowers from the loan forgiveness reduction based on FTE employee levels. Specifically, the Borrower is exempt from the reduction in loan forgiveness based on FTE employees described above if both of the following conditions are met: (1) the Borrower reduced its FTE employee levels in the period beginning February 15, 2020, and ending April 26, 2020; and (2) the Borrower then restored its FTE employee levels by not later than December 31, 2020 (it previously was June 30, 2020) to its FTE employee levels in the Borrower’s pay period that included February 15, 2020.
