Disclaimer: This information was correct at the time of publication; however, new guidance from government agencies may be issued at any time, causing some or all of this information to change. Please visit our COVID-19 Business Strategy Hub for the latest news and ensure you are subscribed here to receive email alerts as they are released. We are working diligently to provide the most current information as it becomes available under our COVID-19 Actionable Insights For Businesses Series.

On the evening of April 6, 2020, the U.S. Small Business Administration (SBA) issued updates and changes to prior guidance for 7(a) loans under the CARES Act Paycheck Protection Program (PPP).

Things are changing quickly, and we are committed to keeping you informed. This blog will provide you a summary of these latest changes.

These are the latest 7(a) loan updates and changes you need to know about:

1. The SBA has clarified that it will allow the use of the “alternative size standard” to determine eligibility for the PPP 7(a) loans. This means that if your business met the following standards as of March 27, 2020, even if your company had more than 500 employees, you could be eligible to apply for the 7(a) loan:

  • a. The maximum tangible net worth of your business is not more than $15 million, and
  • b. The average net income after Federal income taxes (excluding any carry-over losses) of your business for the two full fiscal years before the date of the application is not more than $5 million.

Use of the “alternative size standard” could allow businesses with over 500 employees to qualify for the 7(a) loans.

2. The guidance confirmed that the $100,000 cap on compensation in determining your payroll costs is only applicable to the cash compensation, and not non-cash benefits. Therefore, you may include items such as retirement benefits and health care premiums in addition to up to $100,000 in cash compensation when calculating your payroll costs.

3. It was confirmed again that gross payroll is the basis for determining payroll costs. Therefore, do not subtract federal income tax withholding and FICA withholding in determining the amount of payroll costs for an employee. However, note that the employer portion of payroll taxes is not included in the calculation of payroll costs.

4. In determining average monthly payroll costs, you may use either the prior 12 months before loan origination or payroll from calendar year 2019.

5. If you have already applied for your loan, you do not need to make changes to your application as the guidance in effect at the time you applied will be honored.

We expect things to continue to change quickly, and we will continue to provide you with updates as they become available. If you need assistance with your 7(a) loan, the Moore Colson team can assist you and your team with the following:

  • Calculating the 7(a) loan amount
  • Helping your business apply for the 7(a) loan
  • Calculating the forgiveness amount
  • Assisting with the forgiveness application
  • Helping with short and long-term cash flow projections
  • Helping calculate the credits under FFCRA and CARES Act

Please click here to contact us or call us at 770-989-0028 if you need help.

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Bert Mills, CPA, is the Managing Partner at Moore Colson. In his role, Bert sets the vision and mission of the Firm and works closely with the Firm’s leadership to drive and implement strategies.

Moore Colson CPAs and Advisors Chris Arnone Audit Practice Leader

Chris Arnone, CPA, is a Partner and Business Assurance Practice Leader at Moore Colson. Chris over 20 years of experience providing audit, accounting and consulting services for companies in the transportation, manufacturing, distribution, staffing, private equity and venture capital industries.




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