Commercial Client Alert – May 26, 2020
PPP Forgiveness Application
On May 15, 2020, the Small Business Administration (SBA) issued the long-awaited Paycheck Protection Program (PPP) Loan Forgiveness Application (Application). The application provides detailed instructions on how borrowers should apply for loan forgiveness.
One unexpected facet of the Application is that it appears to suggest PPP money spent on the lease of personal property will be forgiven. We are not at all certain that this is consistent with, or authorized by, the statute. However, if you have received PPP funds and also incur substantial lease expenses for personal property during the eight-week PPP period, this new wrinkle in the application may be useful to take into consideration.
The Application clearly states that “[n]onpayroll costs eligible for forgiveness consist of: (b) covered rent obligations: business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020.” The Application thus indicates that payments on personal property leases that are in place prior to February 15, 2020, and paid or incurred during the 8-week (56-day) covered period are eligible for forgiveness.
This change, to the extent it remains viable, can be beneficial for your business, as it allows your business to count the expenses for personal property leases, such as those for a fleet of trucks or computers, towards the amount of the loan to be forgiven. Provided the Application states the actual SBA policy towards forgiveness, this change may provide a real benefit to many businesses.
Please remember that all non-payroll expenses, taken together, may not exceed 25% of the value of any PPP loan.
The plain language of the CARES Act indicates, contrary to the Application, that only interest on such debt obligations can be an “allowable expense,” and that forgiveness is limited to interest on a “mortgage” on real property. There is no explanation of this apparent change effected by the Application. We are monitoring the relevant administrative agencies on a continuing basis and will advise clients if additional information is forthcoming on this issue.
The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2020.