Loan Forgiveness Update

5.21.20 Update
During our weekly PPP webinar yesterday, we received many questions regarding possible extensions of the 8-week covered period and the June 30 Rehire Exemption date. Let’s revisit what we know as of today:
  • The PPP Loan Forgiveness Application confirms the 8-week covered period begins on the date the loan is disbursed
  • The FTE Reduction Safe Harbor and Salary/Hourly Wage Safe Harbor date is confirmed to be June 30, 2020
Now let’s talk about speculation. Many articles have been published over the past couple days related to what is being referred to as The Paycheck Protection Program Flexibility Act (H.R. 6886). I’ve linked one here as it is an easy read.
The most important parts of this proposed bill include:
  • Extending the FTE and Wage Safe Harbor past the existing deadline of June 30, 2020
  • Extending the loan term on all unforgiven PPP loans from 2 years (the CARES Act allows for terms up to 10 years)
  • Eliminating the 75/25 spend rule, which states borrowers must spend at least 75% of loan proceeds on payroll to potentially achieve 100% forgiveness
  • Extending the 8-week covered period to 24-weeks
  • Allow borrowers to defer payroll taxes (as defined in the CARES Act)
It’s unclear how quickly a bill could get through the legislature.
The takeaway here is it is vital you understand the rules as they exist today, understand where the rules are unclear and where judgement will come into play, and also keep an eye on what is happening that may change the rules into the future.
Ceterus will continue to monitor everything going on related to PPP and keep you updated.
5.19.20 Update (Based on 5.15 SBA Updates)
The PPP loan forgiveness application was released Friday night. It was met with widespread criticism from borrowers, lenders and organizations like the AICPA. The application does not answer all outstanding questions and ends up creating new ones.
The SBA estimates the application and documentation gathering will take 180 minutes. I think that is likely wishful thinking for most business owners. The application is anything but simple and the amount of data you will need to gather will take some time given you are required to review compensation by employee for a variety of periods.
Below I will highlight some of the more notable pieces of information from the 11-page loan forgiveness application:
  • There is a full page (page 10) devoted to documentation the borrower MUST submit with the forgiveness application. Separate post coming on this
  • Knowingly making a false statement is punishable under the law, including prison time and large fines


  • Covered Period
  • Confirmed to begin on the day of loan disbursement and will run 56 total days (8-weeks)


  • Alternative Payroll Covered Period
  • Borrowers can choose to align their covered period with the first day of their first pay period following loan disbursement. The 8-weeks will begin on this day as it relates to payroll.


  • Eligible Payroll Costs
  • Payroll costs paid AND payroll costs incurred during the covered period are eligible
  • Payroll costs are considered paid on the day that paychecks are distributed or an ACH is originated
  • Payroll costs are considered incurred on the day that the employees’ pay is earned
  • Payroll costs incurred but not paid during the borrowers last pay period of the covered period are eligible for forgiveness if paid on or before the next regular payroll date


  • Eligible Non-payroll Costs
  • Must be paid during the covered period or incurred during the covered period and paid on or before the next regular billing date
  • Certifications
  • Owner’s compensation does not exceed 8-weeks worth of 2019 compensation capped at $15,385 per individual – in another section of the application they point out that owner’s compensation will be the lesser of 8-weeks worth of 2019 compensation or $15,385


  • Full-Time Equivalent
  • Standard Method – Actual hours divided by 40
  • Simplified Method – 40 hours = 1 FTE; Less than 40 hours = .5 FTE


  • FTE Reduction Exceptions Borrower will face no penalties if the below occur
  • Good-faith written offer to rehire an employee during the covered period which was rejected by the employee
  • Employee is terminated for cause, voluntarily resigned, voluntarily requested and received a reduction in their hours
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