Borrowers can apply for loan forgiveness before the end of their covered period. However, if the borrower has reduced any employee’s wages by more than 25%, the borrower must account for the reduction for the full 8 or 24-week covered period.
If you apply early, note that you forfeit the right to safe harbor provisions allowing you to restore wages by Dec. 31st to avoid reductions in your forgiveness amount.
The safe harbor states that the borrower is excempt from reduction in loan forgiveness based on a reduction in FTE levels if:
- The borrower was unable to operate between Feb. 15, 2020 and the end of their covered period at the same level of business activity as before Feb. 15th 2020 due to being compliant with COVID-19 guidance
- The borrower reduced their FTE employee levels beginning Feb. 15, 2020 and ending April 26, 2020 and they restored their FTE levels no later than Dec. 31, 2020
|Borrower’s Covered Period Length (Weeks)||24|
|FTE Weekly Salary in Reference Period||$1,500|
|FTE Weekly Hours in Reference Period||40|
|FTE Weekly Salary in Covered Period||$1,050|
|FTE Weekly Hours in Covered Period||40|
|Amount exempt from forgiveness reduction (25%)||$375|
|Amount not exempt from forgiveness reduction||$75|
|Non exempt amount X 24 weeks||$1,800|
In the example above, a borrower has a 24-week covered period. His employee makes $1,500 a week in their chosen reference period. However, during their covered period, they saw a 30% reduction in their employee’s wages, even though the employee continues to work full-time. Since the borrower is allowed to reduce wages by 25%, $375 of that weekly wage reduction is exempt, leaving $75 not exempt. If the borrower applied for forgiveness early, they must still account for that reduction for the full length of their covered period. In this example that would total $1,800.
Application and Instructions
The newest application forms along with their corresponding instructions are linked below:
Keep an eye on our COVID-19 page and your email inbox for more PPP Loan information as it comes.
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