The Small Business Administration and the Treasury Department have issued a Paycheck Protection Program (PPP) Loan Forgiveness Application, along with detailed instructions and worksheets.
Dealership PPP borrowers will use the application to apply to their lender for forgiveness of costs properly incurred and payments properly made in conjunction with their eight-week forgiveness-covered period. Applications for PPP loan forgiveness generally will be made after (and maybe well after) a borrower’s eight-week covered period; unless the forgiveness reduction provisions of the PPP are not at issue for a particular dealer, it is expected that forgiveness applications will not be filed until after June 30, 2020.
The new application, instructions and worksheet provide clarity on several, but by no means all, PPP loan forgiveness issues. For example, the new documents do not address the question of whether any floorplan interest payments will be forgivable. However, and importantly, SBA is expected to soon issue rules and guidance to further assist PPP loan forgiveness applicants and their lenders. NADA intends to issue comprehensive guidance and conduct a webinar on PPP loan forgiveness after the expected SBA rules and guidance are issued.
The application, instructions and worksheets are designed to reduce compliance burdens and to simplify the forgiveness application process by including:
- An alternative option for calculating payroll costs using an “alternative payroll covered period” that aligns with a borrower’s regular payroll cycle.
- Flexibility to include eligible payroll and non-payroll expenses paid or incurred during a borrower’s eight-week covered forgiveness period.
- Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness.
- Borrower-friendly implementation of the statutory exemptions from loan forgiveness reductions, including a “safe harbor” based on rehiring employees by June 30, 2020.
- Addition of a new exemption from the loan forgiveness reduction for borrowers who have made good-faith, written offers to rehire workers that were declined or who have other former employees who departed under certain conditions.
- A description of many of the documents that will need to be submitted in support of a forgiveness application.
PPP loan forgiveness will vary with the facts and circumstances of each individual loan and borrower. Consequently, NADA encourages dealership PPP borrowers to provide the application and accompanying documents to their legal and accounting advisors for careful review. (Again, note that additional forgiveness guidance will be forthcoming.) Considering the May 18, 2020, safe harbor deadline, borrowers with loan amounts of $2 million or more may wish to have these documents reviewed by their expert advisors sooner than later. See NADA’s Certification Clarification.