OTA Dispatch Issue 3, 2020

19 Issue 3 | 2020 www.ortrucking.org and sometimes daily, updates and interpretations to the PPP loan guidance. A borrower could apply for forgiveness under the guidance currently in e ect to mitigate the possibility of future guidance updates potentially having an adverse impact on PPP loan forgiveness. Less Ongoing Resources Dedicated to PPP Financial Planning Upon applying for PPP loan forgiveness, the borrower can continue operations with less emphasis on qualified costs and full-time equivalency (FTE) tracking for PPP loan forgiveness maximization. Instead, management can make decisions solely based on what’s most beneficial in the current economic climate. FTE Maintenance FTEs can be reduced to meet operational needs earlier without a ecting PPP loan forgiveness calculations, if the borrower has maintained a certain FTE level primarily to achieve maximum forgiveness. 24-WEEK COVERED PERIOD For borrowers that don’t elect to maintain an eight-week covered period, a 24-week covered period beginning on loan origination is provided through the Flexibility Act. There are a number of significant benefits associated with the 24-week covered period. PROS Greater Opportunity to Accumulate Qualified Costs for Forgiveness Due to the increased covered period, the borrower has more opportunity to accumulate qualified payroll and nonpayroll costs that flow into the forgiveness amount prior to the application of the FTE reduction quotient. With the guidance available as of June 26, 2020, there isn’t any evidence to suggest the qualified costs are to be limited to the borrowing amount prior to the application of the FTE reduction quotient. Therefore, an extended covered period could prove favorable to borrowers adversely impacted by their FTE reduction quotient. Increased Time for Safe Harbor Planning Safe harbor rules under the Flexibility Act allow the borrower to replace the original June 30 safe harbor date with December 31. This gives the borrower extended time to plan for re-hires and salary or wage reduction reversals if necessary to qualify for available safe harbors. Lenders and SBA Application Review Process By the end of the 24-week covered period, PPP lenders and the SBA should have better streamlined their forgiveness application review process, which in turn should ease the borrower application process. Selection of Payroll Periods to Submit for Forgiveness Some borrowers can’t use the alternative covered period because they’re on a longer than bi-weekly payroll schedule, such as bi- monthly or semi-monthly, for example. The additional time should allow borrowers to submit payroll periods without additional calculation or assistance from their payroll processor and still maximize forgiveness. This is achieved by excluding payroll periods that overlap with dates outside of the covered period—at loan origination or the end of their covered period. Additional Eligibility for Noncash Compensation The borrower could include payroll costs, such as retirement contributions, incurred and paid during a 24-week covered period that may not be captured during the shorter eight-week covered period. Ability to Apply for Forgiveness Later Borrowers are eligible to defer the payment of principal and interest on unforgiven PPP loans until the date they receive a final decision regarding forgiveness if a forgiveness application is submitted to their lender no later than 10 months from the end of their covered period. In addition, borrowers that wait to submit their forgiveness application may be able to defer the forgiveness determination by the lender and SBA until calendar year 2021. SUBMITTING APPLICATIONS BEFORE THE END OF 24-WEEK COVERED PERIOD Borrowers may submit loan forgiveness applications prior to the end of their 24-week covered period. The major considerations associated with applying for forgiveness prior to the end of the 24-week covered period include the following. PROS More Flexibility for Borrowers Borrowers can apply for forgiveness before their covered period ends if they already maximized forgiveness. CONS Salary and Wage Reductions Are Calculated Over the Full Covered Period If the borrower applies for forgiveness before the end of the covered period and has reduced any employee’s salaries or wages in excess of 25%, the borrower must account for the excess salary reduction for the full eight-week or 24-week covered period, according to the June 26, 2020, Interim Final Rule (https://home.treasury.gov/system/files/136/PPP--IFR-- Revisions-to-Loan-Forgiveness-Interim-Final-Rule-and-SBA- Loan-Review-Procedures-Interim-Final-Rule.pdf) .