On May 15, the SBA released the forgiveness guidelines and application for loans made under the Paycheck Protection Program Loan program.
To qualify for forgiveness the applicant should have use at least 75% of the loan proceeds for eligible payroll costs over the 56-day period from the date that the loan was disbursed.
Eligible payroll costs consist of compensation to employees in the form of salary, wages, commissions, cash tips (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wages, commissions, income, or net earnings from self-employment, or similar compensation.
In addition, the remaining 25% of the loan proceeds should have been used for the following:
covered mortgage obligations: payments of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property incurred before February 15, 2020 (“business mortgage interest payments”); (b) covered rent obligations: business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020 (“business rent or lease payments”); and (c) covered utility payments: business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020 (“business utility payments”). An eligible nonpayroll cost must be paid during the Covered Period or incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period. Eligible nonpayroll costs cannot exceed 25% of the total forgiveness amount.
You must complete the application for forgiveness and submit it to your lender after the covered period expires and prior to the start of the repayment period on the loan. If you need help in preparing the application, feel free to contact us and we will be willing to assist you and your lender. These guidelines are also the first release. Keep in mind the PPP program is an evolving program and it is possible that the forgiveness criteria may change. I will attempt to keep you informed with any changes as they become available.