SBA Releases First Set of Frequently Asked Questions on PPP Loan Forgiveness

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SBA Releases First Set of Frequently Asked Questions on PPP Loan Forgiveness

After a six-week hiatus, the U.S. Small Business Administration (SBA) released new guidance for Paycheck Protection Program (PPP) loan borrowers.

Included in the August 4, 2020, Frequently Asked Questions (FAQs) on PPP Loan Forgiveness, are three notable clarifications from prior guidance impacting PPP loan borrowers:

  1. Accelerated payments of healthcare coverage and retirement plan contributions;
  2. Payments made under agreements executed prior to February 15, 2020; and
  3. Definition of transportation costs that are eligible for loan forgiveness.

Accelerate payments to maximize loan forgiveness? Not so fast.

Earlier guidance indicated that expenses eligible for loan forgiveness included those that were paid or incurred during the Covered Period or Alternative Payroll Covered Period. However, like the previous guidance for mortgage interest, the FAQ notes that forgiveness is not provided for expenses for group health benefits or retirement benefits accelerated from periods outside the Covered Period or Alternative Payroll Covered Period.

I modified my lease or debt agreement after February 15, 2020. Now what?

For payments under lease or mortgage agreements to be eligible for loan forgiveness, they must be related to an agreement executed prior to February 15, 2020. However, the FAQ expands this guidance to clarify that if a lease that existed prior to February 15, 2020, and expires on or after said date is renewed, the lease payments made pursuant to the renewed lease during the Covered Period are eligible for loan forgiveness. Similarly, if a mortgage loan on real or personal property that existed prior to February 15, 2020, is refinanced on or after said date, the interest payments on the refinanced mortgage loan during the Covered Period are eligible for loan forgiveness.

What exactly qualifies as transportation costs?

Guidance relating to transportation has been vague until now. The FAQ clarifies that eligible expenses for loan forgiveness related to a service for the distribution of transportation refers to transportation utility fees assessed by state and local governments.

Let Aprio help.

Aprio has established a dedicated PPP loan forgiveness team that is continuously monitoring new guidance from the SBA, as well as the Treasury, Congress and the IRS, to ensure we have the latest information when advising our clients.

If you would like to discuss how to interpret these new requirements and accurately complete your forgiveness application to maximize PPP loan forgiveness, contact Aprio’s dedicated PPP loan forgiveness team for a consultation.

Disclaimer for services provided relative to SBA programs and the CARES Act
Aprio’s goal is to provide the most up to date information, along with our insights and current understanding of these programs and regulations to help you navigate your business response to COVID-19.

The rules regarding SBA programs are constantly being refined and clarified by the SBA and other agencies In certain instances, the guidance being provided by the agencies and/or the financial institutions is in direct conflict with other competing guidance, regulations and/or existing laws.

Due to the evolving nature of the situation and the lack of final published rules, Aprio cannot guarantee that additional changes or updates won’t be needed or forthcoming and the original advice given by Aprio may be affected by the evolving nature of the situation.

You need to evaluate and draw your own conclusions and determine your Company’s best approach relative to participation within these programs based on your Company’s specific circumstances, cash flow forecast and business strategy.

In situations where resources are provided by third parties, those services should be covered under a separate agreement directly with that service provider. Aprio is not responsible for the actions of any other third party.

Aprio encourages you to contact your legal counsel to address the legal implications of the impact of the CARES Act and specifically your participation in any of the SBA programs.

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