The CARES Act provides for adjustments to the amount of the pardon based on a reduction in FTEs from one in two reference periods and a reduction in remuneration of more than 25 per cent. As a critical policy under the CARES Act, Congress sought to ensure that employers maintain and/or reinstate their staff before they are able to forgive the entire amount of the loan. Many commentators felt that the adaptation to the TDR had been applied first and then the compensatory adjustment. However, the form is contradictory: the amount of the compensation deficit is deducted from the eligible costs and this amount is then multiplied by the adjustment rate to the TDR. As it did in its PPP loan application, the applicant is also of the view that a false statement to obtain a loan secured by the SBA is knowingly punishable by law, including 18 USC 1001 and 3571 with a maximum prison sentence of five years and/or a fine of up to $250,000; at least 15 USC 645, with a prison sentence of no more than two years and/or a fine of no more than $5,000; and, if subject to a federal insurance facility, at 18 USC 1014 with a prison sentence of no more than 30 years and/or a fine of no more than $1,000,000. Since this loan should be used to help you pay for your staff, it is reasonable that one of the preconditions for pardoning credits is to maintain the number of employees of your full-time staff. If you had five employees when you applied for a loan, you should continue to have at least five full-time employees on your payroll. Remember to understand what is qualified for credit is the first decisive step in taking a proactive approach to documenting the use of PPP loan income. The steps you are taking now could make the lending process less complicated, but there are many things that remain unknown. We await further information from the SBA regarding the loan application process and advise you to consult your SBA banker and lawyer as soon as you have completed the loan application. However, the rules for lending are complex and evolving, even though the extended period of time to apply for a PPP loan (August 8, 2020) has expired. Indeed, on August 24, 2020, the Small Business Administration adopted a new provisional rule of conclusion that added a de minimis rule and new restrictions on forgiveness.
An important development is a new refuge from the calculation of the reduction in TDR for borrowers, whose average number of FTEs was not reduced between January 1, 2020 and the end of the period covered.