SBA and Treasury Publish Interim Final Rule on PPP
Jun 30,2020
Today, June 30, 2020, is the last day a business can apply for a PPP (Paycheck Protection Program) loan. Businesses will now need to focus on applying for loan forgiveness, if they have not already done so. On June 25 and 26, the Small Business Administration (SBA), in consultation with the Department of Treasury, provided additional guidance for businesses applying for PPP loans. There was also a Federal Register notice published on June 26 to finalize Interim Rules about PPP loan forgiveness and loan review procedures. Among the items covered by the Interim Final Rules: Early loan forgiveness Businesses may apply for loan forgiveness early, if they have spent all of the loan amount, but the interim final rule published on June 26 warns that those businesses may face some reductions in loan forgiveness. These two examples from the interim final rule illustrate how: 24-week covered period example: A borrower...
SBA and Treasury Update PPP Loan Forgiveness Application Form
Jun 19,2020
The Paycheck Protection Program (PPP) was very popular when it was introduced, particularly because of the prospect of the loan being fully forgiven if all criteria were met. However, the application forms were long and complicated. On June 16, the Small Business Administration (SBA), in consultation with the Department of Treasury, published a simplified version of the PPP loan forgiveness application form, implementing the modifications made by the PPP Flexibility Act of 2020. The SBA also published a new, EZ version for certain employers. The new application forms were published alongside revised interim rules on how to calculate employee and owner compensation for loan forgiveness as a result of the Flexibility Act. Revised Application Form The revised form incorporates the changes made by the Flexibility Act and include: eligible and non-eligible costs: S corporation owners cannot include their health insurance costs when calculating payroll, but their retirement costs are eligible....
Guidance from the AICPA on Accounting for Forgivable PPP Loans
Jun 15,2020
Businesses, including nonprofits, that qualified for a forgivable loan from the Small Business Administration through the Paycheck Protection Program (PPP) have been given accounting guidance by the American Institute of Certified Public Accountants (AICPA). The guidance addresses how a borrower under the program should account for the loan. The guidance states that the legal form of the PPP loan is debt and may be accounted for in accordance with existing financial liability guidance. A business should: record the loan as a financial liability and accrue interest; not assign additional interest at the market rate; continue recording proceeds from the loan as a liability until the loan is either partly/fully forgiven or has been paid off; reduce the PPP liability by the amount of the loan that was forgiven and record a gain on the extinguishment when legally released from repayment of the PPP loan. If a commercial business entity expects...
Maximizing Forgiveness of Your PPP Loan
Jun 11,2020
The Paycheck Protection Program Flexibility Act, which was signed by the President on June 5, 2020, made changes to the terms of PPP loans. This article reflects those changes.   Marvin Willis, the partner in charge of Smith & Howard’s Accounting & Advisory group, recently appeared in a webinar organized by the Forsyth County Chamber of Commerce to advise businesses on maximizing forgiveness if they were successful in obtaining a Paycheck Protection Program (PPP) loan. Willis cautioned that there have been several changes to the terms of the PPP, so while loan recipients should follow the most recent guidance, published on May 15, when applying for forgiveness, they should also be prepared for more guidance to be issued. PPP calculation process One of the most attractive features of the PPP is the promise of loan forgiveness if certain criteria are met. Among them is that 60% of a loan must...
SBA and Treasury Announce PPP Loan Modifications, Based on PPP Flexibility Act
Jun 09,2020
The Small Business Administration (SBA) and Treasury announced on June 8 that they will be issuing guidance and additional rules for the Paycheck Protection Program Flexibility Act passed by Congress on June 3, 2020. Of particular note, the announcement clarified that partial loan forgiveness will be allowed if the 60% payroll costs threshold is not met. The pending guidance will be accompanied by modified application forms for borrowing and for loan forgiveness. The changes to the PPP rules and modifications to the forms that will be addressed based on the Flexibility Act include: Extended covered period Loan forgiveness is extended from the original eight weeks after the date of loan disbursement to 24 weeks. Borrowers who have already received PPP loans may still opt for the eight-week covered period.  Partial Loan Forgiveness Borrowers may now use 60% of their PPP loan on payroll costs instead of the previous 75% during...
Steps Private Schools Need to Take to Qualify for PPP Loan Forgiveness
May 28,2020
As the COVID-19 pandemic disrupted businesses around the country and Congress stepped in to provide financial aid through the Paycheck Protection Program (PPP), many private schools qualified for help. The attractiveness of the PPP – 100% loan forgiveness – puts the burden on recipients to meet the criteria for forgiveness, and applications must be done in the next three to six months. First, private school leaders need to ask their PPP lenders what is required to fulfill all requirements for loan forgiveness. Generally, criteria fall into three buckets: providing proper documentation, proving economic uncertainty and ensuring all the terms of the loan are met. A brief overview follows: 1. Providing proper documentation Schools must document how the loan was used for payroll costs (at least 75% of the loan amount must be used for this) and proof of the number of full-time equivalent staff on payroll. Documents can include payroll...
SBA Releases Guidance on Good Faith Certification
May 13,2020
Earlier today (May 13, 2020) the Small Business Administration (SBA) and Department of the Treasury released FAQ #46. The new FAQ provides clarification for businesses taking Paycheck Protection Program (PPP) loans, regardless of the loan size. Businesses taking a PPP loan with an original principal amount of less than $2 million will automatically be granted safe harbor relief with regard to the “good faith certification” it is required to provide. According to the FAQ, the “SBA has determined that this safe harbor is appropriate because borrowers with loans below this [$2 million] threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees.” Businesses taking loans greater than $2 million will be subject to a...
SBA Extends Safe Harbor Repayment Date
May 06,2020
If your business or nonprofit applied for a PPP loan prior to April 24, you were required to certify in your application that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” In a subsequently issued frequently asked questions document from the SBA, it was noted that borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. Additionally, you were given a safe harbor repayment-in-full date of May 7, 2020 to be deemed by the SBA to have made that certification in good faith. Yesterday (May 5, 2020) the SBA extended the safe harbor repayment-in-full date to May 14, 2020. Borrowers do not need to apply for this extension. The SBA intends...
Guidance on Paycheck Protection Program Loan Forgiveness
Apr 20,2020
As of April 16, 2020, the funds allocated to the Paycheck Protection Program (PPP) had been exhausted, with an estimated 1.6 million loans extended. The businesses that applied for and obtained the loans now have to turn their attention towards ensuring they are meeting all the conditions of their loan if they hope to have the amount they borrowed forgiven. Conditions for full loan forgiveness One of the most attractive aspects of the PPP is the promise of up to 100% of loan forgiveness, with that forgiveness being tax free. To qualify, the following criteria from the Small Business Administration (SBA) must be met for the 8 weeks from the date the borrower receives its SBA loan funding: maintain full-time equivalent employee headcount and payroll costs as of February 15, 2020 (75% of the loan amount); meet obligations for mortgage interest payments, rent and utilities (the remaining 25% of the...
SBA Funds for PPP Loans Have Run Out: What’s Next?
Apr 16,2020
The Small Business Administration (SBA) announced today that the funds allocated from the CARES Act for the Paycheck Protection Program (PPP) have been exhausted. The program, which launched on April 3, 2020 has provided $349 billion in loans to small businesses. Treasury Secretary Steven Mnuchin announced last week that the administration is working with Congress to add more money to the PPP and that the parties are trying to reach an agreement on a package that will immediately increase funding. They are in talks today, April 16, 2020. With this in mind, if you plan to apply, we recommend you contact your commercial banker so that you can take the appropriate steps to be ready when additional funding is in place and applications are again accepted. We are following this news and will update you once we learn more. As always, please contact your Smith & Howard advisor if you...

Go back to Blog Home