Is there a reduction in loan forgiveness if I’ve laid off employees?

FAQ Answer
  • Under the CARES Act, the portion of a PPP loan that is eligible for forgiveness will be proportionally reduced by the amount of (i) any reductions in full-time equivalent employees during the covered period as compared to the average number of full-time equivalent employees per month during certain historical periods prior to the COVID-19 pandemic and (ii) certain reductions in salary or wages during the covered period. However, borrowers have an opportunity to cure those reductions by rehiring employees who were terminated between February 15, 2020 and April 26, 2020 and by restoring salaries or wages for employees whose pay was reduced during that period by June 30, 2020.
  • The PPP Flexibility Act provides that forgiveness will not be reduced for employee headcount reductions between February 15, 2020 and December 31, 2020 if the borrower is able to document that either: (i) it is unable to rehire individuals who were employees on February 15, 2020 and is unable to hire similarly qualified employees for unfilled positions by December 31, 2020, or (ii) it is unable to return to the same level of business that was conducted prior to February 15, 2020 as a result of guidance from the Secretary of Health and Human Services, the Director of the Center for Disease Control and Prevention or the Occupational Safety and Health Administration relating to COVID-19 safety (including as a result of complying with standards for sanitation, social distancing and other worker or customer safety requirements). In addition, the period to cure reductions in headcount, salary and wages is extended from June 30, 2020 to December 31, 2020.
FAQ Weight
20