PPP Loan Additional Guidance for Clients

May 20th, 2020

Dear Valued Clients & Business Partners,

We want to make you aware of some additional guidance around the Paycheck Protection Program (“PPP”) loan forgiveness that was released by the U.S. Small Business Administration (“SBA”) on May 15th. Below is an executive summary of the most important and relevant information for you to review. We want to remind you that during these times, we are here to serve all of you any way we can. If you are interested in setting up time to speak with a member of our team, we can arrange a time to discuss further how these changes impact you personally.

1. Forgivable Cost Categories:
• Payroll Costs *at least 75% of total forgiven amount must lie within this category*
• Business Mortgage Interest Payments
• Business Rent or Lease Payments
• Business Utility Payments

2. Payroll Cost Highlights:
• Deduction of covered expenses ‘paid’ or ‘incurred’ during the 8-week covered period
• Payroll costs are considered incurred on the day that pay is earned, and considered paid on paycheck distribution date
• Payroll Cost Categories:
- Cash Compensation – Cannot exceed annual salary of$100,000, as prorated for the covered period (or $15,385 for the 8-week period per individual)
- Non-Cash Compensation – Not subject to same limitations as cash compensation (includes employee covered health insurance, retirement contributions, etc.)
- Owner Compensation – Capped at the lower of (1) $15,385 or (2) the 8-week equivalent of the owner’s applicable compensation in 2019

3. Non-payroll Costs Highlights:
• Must be paid or incurred during the 8-week covered period
• Eligible costs include:
- Business Mortgage Interest – Must be incurred before 2/15/2020
- Business Rent or Lease Payments – Agreements must have been in place on or before 2/15/2020
- Business Utility Payments – Service must have begun before 2/15/2020

4. Reductions in Average Full-Time (“FTE”) Equivalency Highlights:
• Guidance issued to help borrowers specifically calculate the average FTE
• Borrowers can exempt employees from FTE reduction limitation if they:
- Rejected a written offer of rehire
- Were fired for cause
- Voluntarily resigned
- Voluntarily requested and received a reduction in hours
• FTE reduction safe harbor exempts certain borrowers from loan forgiveness reduction based on FTE levels

5. Salary/ Hourly Wage Reduction Highlights:
• Reduction to forgiveness when salary or hourly wages reduced by more than 25%
• Exclusion of employees whose annual salary exceeded $100,000 in 2019

Please note that we will be hosting a Webinar to discuss the updates to the PPP Loan Guidance and Forgiveness Calculations next Friday, May 29, 2020 at 11 a.m. (Eastern). Over the next few days, you will receive an e-mail invitation with more information and registration details. In the meantime, stay safe and let us know if we can be of service to you in any way.

Best Regards,
The Siegfried Advisory Team

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