A: In order to accommodate PPP borrowers with a bi-weekly (or more frequent) payroll, borrowers now have the option on the application to calculate eligible payroll costs using the eight-week (56-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date (the “Alternative Payroll Covered Period”). For example, if the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26, and the last day of the Alternative Payroll Covered Period is Saturday, June 20—56 days from April 26.
This comes as a relief to many PPP borrowers, as the language of the CARES Act and the subsequent rules and regulations issued by the SBA made it appear as though payroll costs would only be eligible for forgiveness if the expenses were “paid and incurred” during the eight-week period that started the day of the first disbursement of the PPP loan (the “Covered Period”). For certain borrowers, this would have been an accounting nightmare, as their payroll schedule did not coincide with when their business received PPP funding. Borrowers now have the option to use the Alternative Payroll Covered Period for a borrower’s payroll costs, employee health insurance, retirement plan contributions, and state and local taxes assessed on employee compensation calculations if the period would better coincide with their business’s payroll schedule.