On August 4, the Department of Treasury and the Small Business Administration (“SBA”) released a new set of Frequently Asked Questions (“FAQs”). These FAQs further update the loan forgiveness process under the Paycheck Protection Program (“PPP”). The new FAQs can be found here. In a previous post, we discussed an update that explained the forgiveness application process, which can be found here.
With this update, there are significant changes to loan forgiveness for owner-employees. The amount of forgiveness for compensation paid to owners who work at their company depends on a few factors. Forgiveness for owner-employees’ compensation “is capped at $20,833 per individual in total across all businesses in which he or she has an ownership stake.” If an owner-employee selected the eight-week covered period, the cap decreases to $15,385. If the owner-employee compensation exceeds these amounts over the course of the covered period, such owner-employee can choose how the amount is allocated among businesses.
The FAQs also clarified that “payroll costs” for the employer does include group healthcare plans, but these plans are not included in the owner-employee compensation cap. Further, it is now official that “tips, commission, bonuses, and hazard pay” are included in “payroll costs.” Finally, the FAQs shed light on interest calculated on a PPP loan. Interest will begin to accrue immediately from the date of disbursement, and the “borrower is responsible for paying the accrued interest on any amount of the loan that is not forgiven.”
As always, the Business Group at Stock and Leader can help business owners navigate their PPP loans or any other matter relating to the CARES Act. Contact a member of Stock and Leader’s COVID-19 Business Response Team for further guidance: