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PPP Loan Forgiveness Application Details

Client Alert

As PPP loan recipients start to take stock of how they’ve used funds over the eight-week period, many businesses are eager to move ahead with the forgiveness portion of the program. How much of the loan will be forgiven is determined by the Small Business Administration (“SBA”), as provided in the CARES Act.[1] Over the weekend, the Department of Treasury released details on the forgiveness application, which can be found here.

Fund Usage

If the PPP funds are used to make payments on (1) payroll costs, (2) interest on mortgage obligations, (3) rent/lease payments for real and personal property, and (4) utility payments, those funds will be forgiven. However, a borrower’s use of PPP funds may only be forgiven if payroll costs account for 75% or more of the payments. That means only 25% of the payments forgiven can be for used for interest on mortgage obligations, rent, and utility payments.

Note that this is the first time that rent/lease payments from personal property have been indicated under the PPP forgiveness program. 

Payroll Cost Details

Eligible payroll costs are considered paid on the date payroll checks are distributed. The payroll costs are considered “incurred” on the day the employee’s pay is earned. Payroll costs incurred but not paid during the borrower’s last pay period of the covered period are eligible for forgiveness if paid on or before the next regular payroll date. Recall that the covered period as specified in the CARES Act begins at the time of receipt of the PPP funds. This may cause difficulty for many borrowers that use bi-weekly (or more frequent) pay periods if the receipt of the loan proceeds didn’t line up with the first day of their specific pay period. Under the guidance indicated in the Forgiveness Application, borrowers may elect to use an Alternative Payroll Covered Period which would begin on the first day of the first pay period occurring after their receipt of the PPP loan funds.

The Other 25%

Payments on mortgage interest, rent, and utility payments must be paid or incurred during the covered period and paid by the next regular billing date (even if payments occur after the covered period).  Utility payments include electricity, gas, water, transportation, telephone, or internet access. 

Forgiveness Formula

Any amounts forgiven under the PPP will be considered “canceled indebtedness” by the SBA. Such canceled indebtedness will not be taxed by the federal government.

The amount forgiven cannot exceed the principal amount of the financing originally made from the SBA. Additionally, the amount forgiven will be decreased proportionately based on the reduction in the number of employees on a borrower’s payroll. This reduction will only occur if the borrower does not maintain the same number of employees the borrower listed in its’ application. There is, however, an exception: if a borrower lays off an employee, offers to rehire the employee, and the employee refuses, the reduction in the number of employees of borrower will not penalize the borrower for loan forgiveness purposes. Further, the amount forgiven will be decreased proportionately based on the reduction in the salary of employees on a borrower’s payroll, if that salary decrease is greater than 25% of employee’s original salary. 

Application & Forgiveness Approval Protocol

A borrower seeking loan forgiveness must submit a forgiveness application to its SBA lender. The lender’s application must include documentation that:

  • Verifies the number of full-time equivalent employees,
  • Includes pay rates (IRS payroll taxes, state income, payroll, and unemployment insurance filings),
  • Verifies payments on mortgage interest, rent, or utilities, and
  • Certifies the use of funds is true, correct, and complies with the CARES Act.

The verification of full-time equivalents may be calculated, at the election of the borrower, on either of the following time frames: 02/15/2019 – 06/30/2019 or 01/01/2020 – 02/29/2020. The verification of pay rates will be calculated by the employee’s most recent full quarter during which the employee was employed before the covered period. All of this documentation must be maintained for at least 6 years by the borrower.

The lender must issue the borrower a decision on the amount of the loan forgiven within 60 days after the borrower files the loan forgiveness application. All loans in excess of $2 million will be reviewed by the Department of Treasury when a loan forgiveness application is received.

[1] CARE Act Section 1106: Loan Forgiveness.


Valley National Bank/Trulieve Loan: A Big Step Out of the Shadows

In a late December press release, Trulieve announced that it had secured a $71.5 million commercial bank loan. In addition to the amount of the loan, which may be the largest commercial bank loan to date to a cannabis company, the release prominently identified Valley Bank and featured both a quote from Valley’s Senior Vice President, John Myers, and a description of the Bank’s service platform and commitment to the cannabis industry.

The End of Non-Competes? The Impact It Will Have on the Healthcare Industry

On January 5, 2023, the Federal Trade Commission (“FTC”) announced a proposed rule that, if enacted, will ban employers from entering into non-compete clauses with workers (the “Rule”), and the Rule would void existing non-compete agreements. In their Notice, the FTC stated that if the Rule were to go into effect, they estimate the overall earnings of employees in the United States could increase by $250 billion to $296 billion per year. The Rule would also require employers to rescind non-competes that they had already entered into with their workers. For purposes of the Rule, the FTC has defined “worker” to also include any employees, interns, volunteers, and contractors.”

2022 Healthcare Recap and 2023 Healthcare Check-Up

As the country begins to return to a new “normal” following the COVID-19 pandemic, there are many healthcare rules changing on both the federal and state levels as a result. Thus, it is important for healthcare providers and their employers to be aware of these changing rules, and any implications they may have on their practice. Look back on healthcare in 2022 and find a checklist for 2023.

Direct Support Professional Retention Payments

On December 15, the Ohio Senate and House passed House Bill 45, which authorizes the Department of Developmental Disabilities (DODD), in conjunction with the county boards of developmental disabilities, to launch their initiative to issue retention payments to Direct Support Professionals (DSPs). These retention payments will be distributed quarterly to participating home and community-based waiver providers to address the workforce crisis in the direct provider sector. Governor DeWine needs to sign the Bill to begin the payments, but he is expected to do so by the end of 2022.

Real Estate Investors Position for 2023 Opportunities

Real estate investors weathered another year in a post-pandemic world, with the year closing with yet another interest rate increase coupled with both uncertainty and heightened interest carrying into 2023. Just last Wednesday, the Federal Reserve raised its benchmark interest rate 0.50 percentage points, shifting the target range to 4.25% to 4.50%. The new level is the highest the fed funds rate has been since December 2007 and marks the seventh rate hike this year. So what does this mean to investors, brokers, lenders, and others in the real estate world? Read a few perspectives below from stakeholders familiar with our BMD clients and the markets in which they do business.