Since inception by way of the CARES Act, the Paycheck Protection Program (PPP) has been the prime focus for American small businesses. That focus has generated many questions and concerns as such a massive program pieced together in a very short period of time is inherently subject to ambiguity and unintended outcomes.

On Friday, May 15, 2020, the U.S. Small Business Administration (SBA) released an application with instructions for how PPP borrowers can receive forgiveness for a PPP loan. The application addressed mathematical questions and provided some clarity on terms previously undefined, but much remains to be answered. Additional regulations and guidance are anticipated from the SBA to assist in completion of the application. Although the forgiveness application and instructions address some of borrowers’ questions, there are still questions many borrowers are asking themselves.

My bank has not put all the money I was approved for into my bank account because I may not use it all. Is that OK? If not, what should I do?

Under an Interim Final rule posted April 28, 2020, lenders must make a one-time, full disbursement of the loan amount within 10 calendar days of loan approval. If a lender has not fully disbursed the full amount of the approved funds, borrowers should contact their lender.

Withheld funding by a lender does not change the PPP loan amount if it has been approved by the SBA. If at the end of the 8-week covered period there are remaining funds that were not spent, the balance becomes a loan with a 1% interest rate and 2-year maturity.

However, if at any time a borrower determines they will not use the full amount of the approved loan, there are no prepayment penalties.

If we get reimbursed by a client, like temporary services, or receive government funding that covers payroll for some of our employees, are those payroll costs excluded from the forgivable portion?

Reimbursement for temporary services and qualification for forgiveness would depend on the nature of a borrower’s relationship to a client. If the borrower is a Professional Employer Organization (PEO) that provides temporary employees in the ordinary course of business, the client would be eligible to have claimed wages for those employees with appropriate documentation, such as Schedule R of Form 941 or a statement documenting the wages and payroll taxes provided by the PEO to the client. In that case, the borrower’s payroll cost to employees providing services to such a client would not be eligible for forgiveness. Absent that agreed-upon arrangement, the reimbursed costs would be includable in the borrower’s taxable revenue and would not impact payroll costs eligible for forgiveness.

If the funding is governmental reimbursement for payroll costs, specifically the sick or family leave credits provided for in FFCRA, then those payroll costs are excluded from the forgivable portion.

If the funding is another government program, the other funding should be used for expenses other than those that are eligible for forgiveness under the PPP in order to prevent scrutiny of duplicative benefit.

When will we have to provide our lender with the documents for the funds spent?

A written application for forgiveness is to be provided to the lender at the end of the 8-week period, and the lender is to make a determination on the application within 60 days. Although there is a 6-month deferral on loan payment, the application for forgiveness should be submitted as soon as administratively possible after the 8-week covered period.

When will interest on the loan start?

Interest will begin to accrue following the date of disbursement of the loan. In addition to the principal, the accrued interest is eligible for forgiveness. Additional guidance from the SBA is pending for the determination of a loan receiving partial forgiveness and the accrued interest for the amount not forgiven.

How long do we have to pay back any of the funds that were not forgiven?

For funds not forgiven and remaining in the loan balance, the maturity on the loan is two years. Payments on the loan are deferred for 6 months from the date of disbursement.

As previously mentioned, additional guidance on the loan forgiveness application is anticipated. Borrowers are advised to keep in communication with their lending institutions and financial advisors as guidance to this program continues to be released.

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The Memphis office of CBIZ & MHM is comprised of over 100 employees, which include more than 50 Certified Public Accountants (CPAs), and 14 Managing Directors. CBIZ & MHM are ranked together as one of the Top Ten accounting providers in the nation, as distinguished by Accounting Today, INSIDE Public Accounting and Public Accounting Report. We serve the country’s growing midmarket with more than 90 offices and 3,959 employees nationwide. MHM, an independent CPA firm, provides high quality audit and assurance services while working closely with CBIZ, an accounting, tax, and consulting services provider. CBIZ & MHM are members of Kreston International Limited, a global network of independent accounting firms. Our audit and tax professionals are located together and function as a team to provide a seamless level of service to our clients.

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