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Why you may want to hang tight before filing for PPP Loan forgiveness

More changes and new legislation can significantly impact your loan forgiveness. But you still need to make sure you keep your calculations current.




The SBA started accepting Loan Forgiveness Applications from banks on August 10th. However few banks have opened their portals to their borrowers.

That's because the PPP goal posts are moving…again.

In true form, and just days before the new loan forgiveness portal was open, the Treasury released new guidance on allowable costs, sending some borrowers and their advisors back to their spreadsheets to recalculate their numbers to make sure they comply.

Add new legislation inching its way through Congress that could substantially change the program (again), and bankers, borrowers and their advisors (like us!) are throwing their hands up and are back into a holding pattern-- watching the numbers and trying to maintain compliance as we know it.

Treasury made additional clarifications via new FAQs & Interim Final Ruling:

Some of the new provisions released by the Treasury in August and also through IFRs:

  • Processing loans & interest:

  • Interest is accrued only on the portion of the loan not forgiven, and payments are not required until the SBA sends the forgiveness amount to the bank.

  • Also clarified that scanned copies, e-signatures and e-consents are allowed to be used.

  • Payroll costs:

  • Owner compensation was previously limited to a max of $20,833 per individual but the Treasury now limits that to be $20,833 across all businesses in which that individual has an ownership role.

  • Retirement costs allowable for owners is also capped at 20.833% of 2019 retirement contributions.

  • There is no pre-payment allowed for healthcare or retirement costs from outside the covered period (e.g. 8 or 24 weeks).

  • Partners in a partnership are eligible for 20.833% of 2019 K1 income but payments to partners must be made during the covered period or alternative covered period in order to qualify for forgiveness.

  • Owner-employees subject to the salary and retirement cap limitations were further defined as owner-employees that own 5% or more of a C or S corporation.

  • Non-payroll costs:

  • Payments made on renewed leases or interest payments on refinanced mortgage loans are eligible for forgiveness if the original lease or mortgage existed prior to February 15, 2020.

  • "Transportation" costs have finally been clarified. The latest guidance narrows the vague category of "transportation" down significantly to "Transportation utility fees assessed by state and local governments." Then links to this site for further clarification.

  • Forgivable rent expenses were further clarified:

  • Forgivable rent must be reduced by the amount received for a sub-tenant. (E.g. if you have $7,000 in rent expense monthly and you received $2,500 from a sub-tenant you can only claim $3,500 for forgiveness.

  • Interest expense on a mortgage is only forgivable up to the percentage of the space that is being used by the borrower.

  • Home office expenses may only include the share of covered expenses deductible on the borrowers' 2019 tax filing or if a new business, the borrower's expected 2020 tax filings.

  • Rent payments to related parties are eligible as long as the amount of the loan forgiveness requested for rent isn't more than the amount of mortgage interest owed on the property that is attributable to the space being rented. Mortgage interest payments to a related party, however, are not eligible for forgiveness.

Don't be fooled… there are many more components to the loan forgiveness calculation than those listed above. And the onus on providing accurate calculation falls squarely on you, the borrower.


Either check out the Treasury's FAQs and the recent IFR or contact your accountant or advisor, or us to make sure you are complying with all provisions to avoid surprises with your loan forgiveness.

So as the Treasury is clarifying the PPP loan forgiveness definitions, more changes are likely coming in the Rubio/ Collins bill called the Continuing Small Business Recovery and Paycheck Protection Program Act.This bill is only one of a group of bills under the HEALS Act proposed by the Senate. While there are significant differences between the two parties regarding many provisions of the HEALS Act, there is generally strong support for the Rubio/Collins bill and we expect it to pass with few changes.

The Rubio/ Collins bill includes a number of borrower- friendly changes:

  • A second round of PPP loans for businesses with fewer than 300 employees and at least a 35% reduction in gross receipts (down from 50% in their original plan)

  • Expanding allowable non-payroll costs to include things such as supply costs, costs for adapting workplaces for safety, PPE, and cloud computing.

  • Automatic forgiveness for loans under $150K as long as the borrower attests to the fact they made a good-faith effort to comply with the requirements and retains records to provide compliance.

  • Allowance for borrowers to increase their loans due to changes in the regulations from the time they applied.

  • Removes the requirement for documentation to be submitted with loan forgiveness application for businesses with loans from ($150,000-$2,000,000) but requires the borrower to maintain records for audit.

  • Allows 501(c ) (6) organizations to apply but prohibits lobbying and "businesses owned by Chinese entities" from applying.

So in summary, now is probably not the time to submit an application if you are stretching to spend your PPP funds. While we're all in this holding pattern waiting for final regulations and bank portals to open to apply for forgiveness, the best thing you can do now is keep projecting your loan balance as the regulations stand today. Hopefully you'll be able to achieve full loan forgiveness with payroll alone, but if not, new relief is coming. Stay tuned….

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