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PPP Forgiveness: First SBA FAQ on Forgiveness

What a way to start our week! We have all eagerly been awaiting our many questions to be addressed on the Paycheck Protection Program (“PPP”) loans. On April 2, 2020, the SBA issued Interim Final Rule 1 with an initial set of rules and guidelines related to the program. Most of the focus, however, was on eligibility, the definition of payroll costs, and how to calculate the requested loan amount.

April 2, 2020 feels like almost a lifetime ago. We can hardly see it in our review mirrors. Since then, we have received numerous updates through SBA frequently asked questions (“FAQs”) and additional interim rulings. However, these updates have been silent on dealers’ questions involving different strategies to help maximize and understand loan forgiveness.

One of our biggest concerns has been whether dealers would be penalized if an individual employee refused to come back to work. As part of the Coronavirus Aid, Recovery, and Economic Security (“CARES”) Act, the government beefed up individual unemployment benefits to provide an additional $600 per week on top of state maximum benefits. This allows a large portion of the workforce to effectively earn a higher wage while being unemployed. In addition to unemployment, dealers are also facing the health concerns of individual employees who are scared to work in fear of the disease.
Up until this point, it has been unclear whether we would be penalized for reductions in headcount and wages because an employee refuses to return to work. On May 3, 2020, the SBA issued FAQ # 40 which addresses this exact concern. Dealers who have made a good faith, written offer of rehire to an employee at the same salary/wages and number of hours will not be penalized for reducing headcount and wages on that employee during the 8-week covered period. The offer to the employee and the employee’s rejection of that offer must be documented by the dealer.

This is great news and a favorable interpretation by the SBA for the dealer community. We continue to have numerous unanswered questions on how to calculate and maximize loan forgiveness. Nevertheless, it is refreshing to see guidance issued that addresses real issues dealers are facing in an appropriate and practical way.

The PPP rules and guidelines have been extremely fluid throughout the life of the program. Further guidance may be issued on this particular topic to provide further clarity. The specific rules relating to numerous provisions of the CARES Act and the PPP loans continue to develop with many items changing on seemingly a daily basis. Accordingly, please contact us with any questions you may have. Our Dealership Hotline Number is 317-886-1624 or you can send an email to

Jordan Baierl is a trusted member of the HBK CPAs and Consultants Dealership Solutions Group, which provides tax, accounting, transactional and operational consulting exclusively to dealers.

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Far West Equipment Dealers Association

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