CLA professionals discuss COVID-19 and the issues facing professional service organizations. We’ll also continue to provide the latest updates regarding PPP, forgiveness, and more.
- Leslie Boyd, Principal, CLA
- Randie Dial, Managing Principal of Office, CLA
- Wendi Boddy, Managing Partner of Office, CLA
- Jack Rybicki, Principal, CLA
In case you missed it:
Do you have any documentation where I can reference the ability to include interest costs on equipment loans? Our bank seems to believe those charges to be ineligible.
The SBA issued a set of FAQs on forgiveness on August 11th
(https://home.treasury.gov/system/files/136/PPP--Loan-Forgiveness-FAQs.pdf). In the Loan Forgiveness Nonpayroll Costs FAQs section, Q4 (see below) clarifies that interest on loans that are secured by real or personal property is eligible for forgiveness. Hope this is helpful.
4. Question: Is interest on unsecured credit eligible for loan forgiveness?
Answer: No. Payments of interest on business mortgages on real or personal property (such as an auto loan) are eligible for loan forgiveness. Interest on unsecured credit is not eligible for loan forgiveness because the loan is not secured by real or personal property. Although interest on unsecured credit incurred before February 15, 2020 is a permissible use of PPP loan proceeds, this expense is not eligible for forgiveness.
We are a trailer dealer and we finance both rental trailers and leased trailers, can we include the monthly interest paid for those items in the 8-week period?
The trailers would be considered personal property, so I don’t see why not. One area we are concerned about is if the line of credit or debt instrument is secured by “substantially all the assets of the company”, which would include both personal property (i.e., trailers) and other assets that would not be considered real or personal property (i.e., accounts receivable). In that case where the security interest cuts across multiple types of assets, it is unclear if that interest will be eligible. You may want to consider not including the interest and then just using a longer covered period (say 10 – 12 weeks) to get there based primarily on payroll costs.
Also, the interest would be subject to the 40% cap on non-payroll costs eligible for forgiveness.