The PPP Loan Program was a bit of a mess when it was first enacted earlier this year as part of the CARES Act: larger businesses and those without real need took advantage of the lax application rules and applied for CARES Act loans alongside businesses in desperate need. This resulted in the rapid draining of initial funds for PPP loans and many ailing businesses shut out altogether. 

As the PPP Loan process gears up for more funding and another round of disbursement, the Department of the Treasury updated its FAQ regarding the application process. The language now emphasizes that, although the SBA credit rule has been suspended, businesses must still certify in good faith that the loan is necessary for its survival. This will likely be followed by more administrative scrutiny from the program itself, and extra attention will be given to other potential sources of funding that the business has access to. Businesses who wish to take advantage of the PPP program should gather as much documented evidence of need as possible before re-submitting an application. 

The FAQ also clears up a few other important points:

- The CARES Act does not consider any compensation greater than $100,000 to be a qualified payroll cost eligible for reimbursement. This $100,000 cap applies only to monetary compensation, and not to other forms of compensation (such as employer health plan premium contributions).

- The PPP covers paid sick leave, but it does not cover leave under the FFCRA for which a refund tax credit it allowed. 

- The PPP does not cover payroll costs associated with compensation towards an independent contractor or a sole proprietor. However, an independent contractor/sole proprietor may themselves apply for a loan under the PPP. 
- An employer’s share of federal payroll taxes is not part of the payroll costs.

Employers who have submitted their applications prior to the release of this new information need not revise their applications to reflect the new information: information given based on laws in effect at the time of application filing will be honored. 

You can read the entire FAQ HERE.