The SBA has published additional guidance regarding PPP loan forgiveness. As you may be eager to learn more about how to prepare for loan forgiveness, we want to make sure we are providing you with helpful information.

The Paycheck Protection Program Flexibility Act

The Paycheck Protection Program Flexibility Act passed June 5, 2020. The Act will likely increase the potential for forgiveness for many businesses by amending the CARES Act by:

• Expand the covered period for use of funds from 8 weeks to 24 weeks.

• Decrease the requirement for funds used on payroll from 75% to 60%, with the remaining 40% able to be used for qualified mortgage, rent, and utility payments.

• Extend the period for FTE qualifications to December 31st, 2020.

The Act also extends the deferral period for any amounts not forgiven from 6 months to 10 months.

How can I maximize my potential loan forgiveness?

Guidance is coming out multiple times per week. As of now, forgiveness can be maximized with the following:

• To be eligible for forgiveness, expenses must be either paid or incurred during the (now) 24-week period that begins on the date when you received your loan funds. For purposes of payroll expenses only, borrowers with biweekly (or more frequent) payroll schedules may elect to start the 8-week period on the first day of the pay period following loan disbursement.

• At least 60% of the PPP loan proceeds should be spent on payroll expenses and no more than 40% of the loan forgiveness amount can be attributable to non-payroll expenses (e.g., mortgage interest, rent, or utility payments).

• Retain existing full-time equivalent (FTE) employee levels and maintain at least 75% of existing employee compensation levels (refer to the instructions in the PPP Schedule A worksheet for additional information). You now have until the end of December 2020 to improve your FTE quotient if it was impacted during the pandemic.

What will I need to submit?

Most banks are still building the process to accept forgiveness applications. The SBA forgiveness application form and instructions—including a list of documentation that must be submitted—are available for reference. Please note that this guidance is not final and is subject to change as additional information becomes available from the SBA and Congress.

For the latest news and guidance from the SBA, check back here for updates, or visit the SBA PPP website.