On Friday, the SBA released an application for borrowers of a PPP loan to request forgiveness. How does it work?
Using the simplified method, X Co. would have only 3.5 FTEs, so doing the math benefits X Co. by resulting in a larger number.
To make sense of this reduction/restoration computation, think of it like this: the SBA will first determine if during the 8-week covered period, a business employs fewer FTEs than it did during the elected reference period: either from 2019 or earlier in 2020. If the answer is no, then the business employs MORE people than in the look-back periods, so no reduction is required.
This line also adds something new to the equation: it states that the amount is capped at $15,384 OR THE 8-WEEK EQUIVALENT OF THEIR APPLICABLE COMPENSATION FOR 2019, whichever is lower. This would prevent an owner from increasing their compensation during the covered period to maximize forgiveness by limiting the amount included in the forgivable amount to 8/52 of the owner’s compensation for 2019.Between lines 10 and 11, things get interesting again.
Any payment of interest on any covered mortgage obligation . The term “covered mortgage obligation” means any indebtedness or debt instrument incurred in the ordinary course of business that is a liability of the borrower, is a mortgage on real or personal property, and was incurred before February 15, 2020,
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