The Small Business Administration gets some kind of perverse joy out of releasing guidance on Friday nights. Last week, it was the new PPP loan application, and this week, it’s the guidance to accompany it.

The Journal of Accountancy did a nice job summarizing each of the new documents on Monday — I definitely recommend reading their brief write-up under the heading “Provisions of note in 2 new interim rules”.

I spent some quality time myself on Sunday going through all 45 pages — it’s actually two sets of guidance, the interim final rule to outline the requirements for loan forgiveness, and the one for loan review procedures and related borrower and lender responsibilities.

Here are my takeaways, with page numbers referenced in each document:

Paycheck Protection Program – Requirements – Loan Forgiveness

• Accrued interest will be forgiven with the rest of forgiveness (no guidance on interest calculation for partial forgiveness) (page 7)
• Still no confirmation one way or the other re: EIDL advance subtraction (page 8) — is this only for EIDL advances that meet the characteristics outlined in the CARES Act, or all EIDL grants?
• Paid OR incurred (not paid AND incurred) — which means unpaid costs from prior periods are in fact eligible (page 9)
• Supplements to salary/wages are included:
  e.g., bonuses, hazard pay, and additional wages paid to replace tips (except to owners in excess of 2019 income) (page 11)
• Payroll to furloughed employees is included (page 11)
• Owners are limited to 8/52 x 2019 compensation (shareholder-employees can also include health insurance and retirement employer contributions, but not Schedule C sole proprietors or partnership partners)
• Otherwise not limited to 8/52 of costs (except owner payrolls) (page 12-13 utility example)
• Prepayments are allowed (only mortgage interest specifically excluded) (page 13)
• FTE reduction exception clarified somewhat (page 13-15)
• Salary/wage reduction (page 19) appears to take hours-worked into consideration for salaried employees — but heads-up: that is not reflected in the AICPA workbook
• Similarly, loan forgiveness will not be reduced for exemptions (page 22), but only an FTE solution is offered; I suspect this means that for the wage reduction spreadsheet, only employees working during the 8-week forgiveness period should be included. (I’ll be asking AICPA to clarify this in the instructions.)
  
  And although not new, I felt they drove home the point that we should make sure to maintain written records of any employees who voluntarily resigned. This will be part of the documentation when substantiating the forgiveness application.

Paycheck Protection Program – SBA Loan Review Procedures and Related Borrower and Lender Responsibilities

• There will be an opportunity to respond to SBA questions regarding loan forgiveness substantiation before a decision is made (page 9)
• There will be an appeal process if eligibility is denied by SBA (page 10)
• The lender will have to review but not audit (independently verify) all documentation and calculations supplied by the borrower, before submitting to SBA
• The lender may rely on third-party payroll processor records (not required to review source data unless these records are not available) (page 11)
• Lenders may rely on borrower representations, but must confirm calculations and substantiation (page 12)
• No date yet by which forgiveness application is due – but bank then has 60 days to submit to SBA and SBA has 90 days to respond (page 12)
  …so it could easily be well over 5 months before you find out whether you got forgiveness.

In summary, I’d say some of these were already clear from the forgiveness application but they finally put it in writing; and some actually confirmed something I could only guess at before; but a few examples actually drove home some important new — or previously vague — points; others were just confirmation that we still don’t know some things, such as the all-important EIDL question.

For a more in-depth walk through the PPP loan forgiveness application, please see Tony Nitti’s excellent line-by-line deep dive — and the AICPA’s spreadsheet calculator. Or if you’re a sole proprietor/ independent contractor/ gig worker who files a Schedule C, then skip the in-depth stuff and follow along with Brian Thompson’s short article instead.

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