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PPP SBA Loan Update: The SBA and U.S. Department of the Treasury Issue Another Round of Clarifying Guidance

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On April 6th the SBA issued further interpretations of the CARES Act and the Interim Final Rule that was released on April 2nd. This Q&A formatted document addresses many concerns that both lenders and loan applicants have raised since the initial SBA loan application began circulating over a week ago. Key clarifications in the FAQ include the following:

  • Compensation limits in calculating the $100,000 limitation on wages and salaries are for cash based compensation only. After limiting salaries or wages at $100,000 per employee, the Act allows applicants to then add non-cash benefits such as employer contributions to pension and retirement savings plans, payment for employee benefits such as insurance premiums, and payment of state and local taxes assessed on employee compensation, such as state unemployment taxes.
  • The new guidance makes clear the Act’s intention was to calculate loan proceeds based on gross wages of employees without regard to federal taxes imposed or withheld, including FICA and FIT withholdings.
  • Businesses that do not fit squarely into the program’s rules for having less than 500 employees or have specific carve-outs allowing more than 500 employees by industry type may have other means of qualifying for the program. An SBA Procedural Notice also allows businesses with less than $15,000,000 of tangible net worth and average net income after Federal taxes of less than $5,000,000 for each of the last two full fiscal years prior to the application. This “alternative size standard” may open up the program to a much wider range of companies.
  • The guidance allows flexibility in determining aggregate payroll costs using either data from the previous 12 months, or for the calendar year of 2019. Employers may also use the same time periods to calculate their number of employees. The application circulated last week did not make this distinction.
  • If your business has already submitted your loan application you are not required to amend your application in light of this guidance and the guidance in effect at the time of submission will be honored by the SBA.
  • For more details on the guidance visit this link.

Berntson Porter is your trusted advisor and we continue to monitor these updates as they become available. For example, we are still awaiting clarifying guidance on the loan forgiveness aspects of this program. We also expect news of a “Main Street” program soon which will provide relief to businesses with more than 500 employees and/or do not meet the alternative size standards to qualify for the PPP loans.