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‘Incredibly helpful’ PPP forgiveness guidelines include alternative payroll schedule
Justin Henry//May 18, 2020
‘Incredibly helpful’ PPP forgiveness guidelines include alternative payroll schedule
Justin Henry//May 18, 2020//
Listen to this articleThe long-awaited form Paycheck Protection Program borrowers need to be forgiven for their loan has been released by the Small Business Administration to “reduce compliance burdens and simplify the process for borrowers.”
“That is incredibly helpful for any businesses in order to understand what costs are potentially eligible for forgiveness,” said Loren Speziale, a partner with the Allentown-based law firm Gross McGinley.
The form offers step-by-step instructions for performing calculations required by the CARES Act to confirm eligibility for loan forgiveness.
The latest SBA guidelines allow borrowers to calculate payroll costs using an “alternative payroll covered period” that the SBA says can be used to align with borrowers’ regular payroll cycles.
Borrowers with a payroll schedule that’s biweekly or more frequent can calculate eligible payroll costs using the eight-week period that starts on the first day of their first pay period following the PPP loan disbursement date, according to the newly released application form.
“What that allows is for an employer to capture more payroll,” Speziale said. “It’s a significant clarification.”
Previous guidance held that PPP loans had to be used within an eight-week period starting from the date of the loan’s disbursement, which “posed some logistical issues for business depending on what their manner of payroll was,” Speziale said.
The PPP requires borrowers to use at least 75% of the funds on payroll expenses and no more than 25% on certain eligible non-payroll costs.
Eligible non-payroll costs — including mortgage, interest, business rent and utility expenses — are required to be paid during the covered period; however, if an eligible non-payroll cost is incurred during the covered period, it could also be paid on or before the next regular billing date, even if that date is after the covered period, according to the guidelines.
“This allows you to truly capture the eight weeks of utility costs that you’re incurring,” Speziale said.
