The Small Business Administration released the Paycheck Protection Program’s Loan Forgiveness Application on May 15th, which answers some questions and provides additional guidance to small business owners who are looking to have their PPP loans forgiven up to 100%. 

Time Period For Forgiveness

The funds must be spent on authorized expenses during a specific time period in order to be eligible for forgiveness. Originally, the time period was 8 weeks from when the first loan deposit was made to your bank account. However, the new guidelines allow businesses to specify the 8 week time period starting with the first payroll date after funds have been received. 

$2M Threshold 

You must verify whether or not your total PPP loan amounts equal $2 million or more. As such, loans of $2 million or more will likely be audited. 

Payroll Reduction Exemption

You are required to maintain the same number of employees in order to qualify for full loan forgiveness, however, there are a few exceptions. If you’ve tried to rehire, in writing, but the employee declined, employees who were let go for cause, and employees who voluntarily quit. 

Owner’s Cap

Owners who pay themselves through owner’s draws, rather than payroll, may be having a more difficult time determining payroll costs. The SBA has clarified that owner payroll amount can be calculated as 8 weeks of compensation from 2019. There is a total forgivable amount cap of $15,385 per individual. 

75/25 Rule

75 percent of the total forgivable amount must be payroll costs, and 25 percent can be authorized non-payroll costs. It is unclear whether or not this rule will be removed in the future based on recommendations. 

While there are still questions that remain, this has been a good start for many small businesses who were unclear about their loan forgiveness. 

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