Recently, the SBA published the Paycheck Protection Program Loan Forgiveness Application (SBA Form 3508). While the application clears up some of the many questions that borrowers may have with regards to forgiveness eligibility, there are still some questions left unaddressed. Here are a few explanations for terms that are used in that document, which might be helpful if you are working on your forgiveness forms.
Alternative payroll covered period
For borrowers with payroll schedules that are biweekly or more frequent, the application allows them to choose an eight-week (56-day) period that begins on the first day of the first pay period that begins after disbursement of PPP funds (the “alternative payroll covered period”). However, if a borrower chooses an alternative payroll covered period, they must apply this pay period to wherever there is a reference to “the covered period or the alternative payroll covered period” but must use the covered period where only the covered period is referenced.
Payroll costs (paid versus incurred)
The application states that “borrowers are generally eligible for the payroll costs paid and payroll costs incurred ”during the appropriate period. Based on this language, it appears that the SBA will be allowing both payroll paid in the appropriate period for work performed just prior to the covered period and for payroll accrued within the eight weeks, even if paid after the covered period, provided that proof of payment is submitted.
Non-payroll costs (paid versus incurred)
The allowable non-payroll costs do not seem as clear as the payroll costs, but it can be read in a similar manner. The application states, “An eligible non-payroll cost must be paid during the covered period or incurred during the covered period and paid on or before the next regular billing cycle.” This means that borrowers may be forgiven for more than the eight weeks of payroll originally anticipated, although individuals will still be capped at $15,385 based on an annualized $100,000.
Businesses will need to work with their financial, accounting or consulting specialists to make sure they are able to maximize forgiveness. Check the SBA website regularly for additional updates on this program.
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