Dear clients and friends,
The SBA has released its loan forgiveness application to be submitted to banks. Congress is discussing changes to the program and we expect that additional changes will be made to the cost certification requirements. However, as of today, this is where we stand. The pertinent details are summarized below:

-    The payroll period is the 8 weeks (56 days) subsequent to the receipt of the loan proceeds. We can elect an “alternate period” which adjusts the “start date” to the first day of the first payroll period following loan funding. Whichever period is elected, all costs must be consistent, i.e. payroll costs and non-payroll costs must cover the same period.

-    At least 75% of the loan proceeds must be expended on payroll related costs; the remaining 25% can cover non-payroll costs. This is an area we will keep an eye on as congress is contemplating relaxing the requirement that 75% of the loan proceeds that must be spent on payroll related costs.

-    The loan recipient must maintain prior payroll levels for full loan forgiveness. If employee head count or pay rates are reduced more than 25% over previous periods, then the loan will not be forgiven in full and there will be calculations required to determine the forgiven amount.

-    Payroll costs will be considered paid on the day that paychecks are distributed or the Borrower originates an ACH credit transaction. Payroll costs will be considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date. Otherwise, payroll costs must be paid during the Covered Period (or Alternative Payroll Covered Period).

-    Same treatment for utility costs – anything accrued for costs incurred but not paid at the end of the end of your 8-week period still count. Ex: Power bill for May is paid on 6/15/2020 and your covered period ends 6/5/2020. You can still use those costs for loan forgiveness.

This guidance is quite detailed and can be confusing. If you feel comfortable tackling this loan forgiveness application, great. If not, we stand ready to assist our clients in this process. However, this will entail significant work for which we will charge based upon our standard hourly accounting billing rates.

As always, we will keep you apprised as changes or additional guidance is available.


Thank you, take care and be safe,

McCarthy Kaster Guerrero CPAs

The above is taken from the McCarthy Kaster CPAs & Business Advisors newsletter which has been a great source of COVID19 financial information. I recommend anyone looking to keep up to date with the constantly changing financial tools associated with the current pandemic to visit their site and join their newsletter. - Jason Whaley, Vice President