On April 6, 2020, the U.S. Small Business Administration (SBA) issued FAQs to provide additional clarification for borrowers and lenders on the Paycheck Protection Program (PPP).

The SBA states that borrowers and lenders can rely on its interpretation of the CARES Act and the PPP Interim Final Rule, and that the U.S. government “will not challenge lender PPP actions that conform with this guidance.”

The following are some key highlights:

• It is the borrower’s responsibility to provide the lender with an accurate calculation of payroll costs with supporting documentation.
• A business with more than 500 employers may be eligible for the PPP as a small business concern if, as of March 27, 2020, it met both tests in SBA’s “alternative size standard.”
• The exclusion of payroll costs for employees with an annual compensation in excess of $100,000 applies only to cash compensation, not to non-cash benefits such as employer contributions to retirement plans, group healthcare coverage, and state and local taxes assessed on the compensation of employees.
• Borrowers that contract with Professional Employer Organizations (PEOs) or other payroll providers may submit payroll documentation prepared by such providers that includes its employees’ wages and payroll taxes reported to the IRS as part of their PPP loan payroll documentation.
• Borrowers should not include any payments to independent contractors or sole proprietors in the eligible business’s payroll costs.
• The time period for most borrowers to use when calculating payroll costs can either be the previous 12 months or 2019 calendar year. Seasonal business may use average monthly payroll for time period between February 15, 2019 or March 1, 2019 and June 30, 2019. Those not in business from February 15, 2019 to June 30, 2019 may use the average monthly payroll costs for the time period between January 1, 2020 and February 29, 2020.
• Lenders are permitted to use their own forms as long as it requests the same information and uses the same language as the Borrower Application form provided by the SBA.

We are all in this together. As our clients and friends, we are here to help you survive today, so you can thrive in the future. Please contact us with any questions you may have. You can also access as-they-happen updates on our COVID-19 Resource Center.