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Financial Planning > College Planning > Student Loan Debt

Advisors Confused by SBA’s New PPP Loan Forgiveness Rule

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The Small Business Administration released Friday an interim final rule that applies to loan forgiveness applications submitted under the Paycheck Protection Program.

Leon LaBrecque, chief growth officer at Sequoia Financial Group in Troy, Michigan, told ThinkAdvisor on Tuesday that advisors “including CPAs are frustrated with the ever-changing landscape of rules and regulations surrounding the PPP.”

Said LaBrecque: “We start with one version of guidance, which is then changed in subsequent rules, and then changed in an application, which is changed by another set of rules. It’s very tough to comply when the rules change continuously, usually on Friday night.”

LaBrecque heads a task force for the Michigan Association of CPAs on how to apply for PPP and how the program affects nonprofits.

One area of frustration is that the interim final rule “doesn’t line up” with the instructions in the PPP loan forgiveness application, which was released May 18, LaBrecque said. The SBA is “now using paid or incurred vs. paid and incurred for both payroll costs and non-payroll costs. The example they use looks like you could only get one month of additional costs (May paid in June).”

The guidance also includes an “expansive definition” of payroll costs, LaBrecque said.

Also explained is that the “bank has 60 days from the date of application to approve request for forgiveness,” while “SBA has 90 days after that date to review the loan or loan application and render payment,” LaBrecque said.

“If only a portion of the loan is forgiven, or if the forgiveness request is denied, any remaining balance due on the loan must be repaid by the borrower on or before the two-year maturity of the loan,” LaBrecque explained. These procedures only apply to loans less than $2 million.

The guidance also includes the following clarifications: Amounts paid to furloughed employees who are paid but not working are eligible for forgiveness; bonuses paid during the covered period are eligible for forgiveness if total compensation on an annualized basis doesn’t exceed $100,000; and owner employees may be limited below $100,000 if they made less than that in 2019.

A “no double count rule” also appears to be missing from the guidance, LaBreque said. “To ensure that borrowers are not doubly penalized, the salary/wage reduction applies only to the portion of the decline in employee salary and wages that is not attributable to the FTE reduction. This is a favorable rule change for businesses but I don’t see this in the instructions for the application for forgiveness.”

Jeff Levine, lead financial planning nerd for and a colleague of Michael Kitces at Buckingham Wealth Partners, added that guidance also clarifies the definition of full-time equivalent (FTE) at 40 hours per week.

Also provided is more guidance on the “alternative payroll covered period,” Levine said, “which will likely be used by a ton of businesses who receive PPP funding in the middle of a payroll period. Without it, it was going to be operationally challenging to pay eight weeks’ worth of salary in the eight weeks following loan receipt and get max forgiveness.”

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