If the PPP loan is only partially forgiven, or not forgiven, any remaining balance due must be repaid by the borrower before the PPP loan’s maturity date.
On August 4, 2020, the Small Business Administration (SBA) and Treasury Department released a list of frequently asked questions (FAQs) on the loan forgiveness provisions of the Paycheck Protection Program.
The FAQs are divided into four categories: (i) general loan forgiveness; (ii) loan forgiveness—payroll costs; (iii) loan forgiveness—nonpayroll costs; and (iv) loan forgiveness reductions.
Highlights of the FAQs
Timing of Payments on PPP Loan (General Loan Forgiveness FAQ #3)
If a borrower timely submits its loan forgiveness application (within 10 months of the applicable “covered period,” which under the Paycheck Protection Program Flexibility Act is either the 24-week period beginning on the date of the first disbursement of the PPP loan or the eight-week period beginning with the first disbursement if the loan was received before June 5, 2020), the borrower is not required to make any payments on the PPP loan until the forgiveness amount is remitted to the lender by the SBA. If the PPP loan is only partially forgiven, or not forgiven, any remaining balance due must be repaid by the borrower before the PPP loan’s maturity date, together with interest that starts accruing effective from the PPP loan disbursement date.
Payroll Costs Eligible for Loan Forgiveness (Loan Forgiveness Payroll Costs FAQs #1 and 2)
If payroll costs are incurred during the covered period but paid by the borrower after the covered period, those payments are eligible for loan forgiveness. In addition, if payroll costs were incurred before the covered period but paid during the covered period, those payments are also eligible for loan forgiveness.
Bonuses and Other Cash Payments Eligible for Loan Forgiveness (Loan Forgiveness Payroll Costs FAQ #5)
Payments such as tips, commissions, bonuses and hazard pay are also included as payroll costs eligible for loan forgiveness, in addition to salaries and wages, subject to the cap of $100,000 in total compensation per employee on an annualized basis.
Group Health Care Benefits (Loan Forgiveness Payroll Costs FAQ #6)
Any payments made by an employer for employee group healthcare benefits that are either paid or incurred during the covered period are eligible for loan forgiveness. This does not include any payments made by employees for such benefits.
Nonpayroll Costs Eligible for Loan Forgiveness (Loan Forgiveness Nonpayroll Costs FAQ #1)
Paralleling the provision for payroll costs summarized above, eligible nonpayroll costs (interest on mortgage obligations incurred before February 15, 2020; rent payments for leases in force before February 15, 2020; utility payments for service that began before February 15, 2020) incurred before the covered period and paid during the covered period are eligible for loan forgiveness. In addition, nonpayroll costs incurred during the covered period but paid after the covered period are eligible for loan forgiveness, so long as those payments are made on or before the next regular billing date.
Renewed Leases and Refinanced Mortgages (Loan Forgiveness Nonpayroll Costs FAQ #5)
If a borrower makes payments on a lease renewed after February 15, 2020, or interest payments on a mortgage refinanced after February 15, 2020, those payments are still eligible for loan forgiveness if the original lease or mortgage existed before February 15, 2020.
Transportation Costs as Utility Payments (Loan Forgiveness Nonpayroll Costs FAQ #6)
Utility payments eligible for loan forgiveness include transportation utility fees assessed by state and local governments.
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