Yes, you’re probably as tired as I am of hearing about PPP loans. But there is news in the last week; lots of news. It seems the loan fairies at the SBA have been busy. And some of the news is good!
Necessary
I my recent blogs lamented the lack of clarity around the work ‘necessary,’ as in, your PPP loan had to be necessary. Then last Wednesday, May 13th, the SBA issued FAQ #46 which says that if your loan is less than $2 million, it is assumed it was necessary. Yep, you don’t have to justify the need for your loan, it has been deemed necessary, just because you initialed a box on the application. That will relieve a lot of anxiety.
Those with PPP loans over $2 million will be subject to audit and lots of threatened scrutiny. I still don’t know who might do the auditing or apply the scrutiny, but that is the threat and warning that the Treasury Department has issued.
Loan Forgiveness
The SBA elves on Friday, May 15th, published the Loan Forgiveness Application, SBA Form 3580, which lays out in pretty good detail what we’re all going to have to do to get these loans turned into grants. Most of it is as expected but there are a few twists and turns.
Of the eight weeks, that means 56 days. The first day is the day the loan funds plus the next 55 days. Yep, the day the loan funds plus 55 more days. I don’t know why it can’t be two months, but it isn’t. Those on semi-monthly or monthly payrolls will probably have to make some adjustments to get the full benefit.
There is some flexibility on the starting point used to measure payroll. The eight-week period typically starts when your loan is funded, but there is an alternative method allowed. This alternative is to start it at the beginning of your next payroll period, assuming your payroll is biweekly or more frequent.
There has also been much discussion about whether the payroll during that 56-day period has to be ‘spent’ or ‘incurred’ or ‘paid.’ Spent doesn’t have an accounting meaning. Incurred means accrued. Paid means paid.
The conservative assumption so far has been to adjust your payroll so that it is both accrued and paid within the 56 days. The Loan Forgiveness Application says that it can be accrued or paid, which will make life a lot easier. More good news, so plan accordingly.
More to Come
There will be more guidance in the weeks to come, but this last week’s news has been helpful.
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