SBA Releases PPP Loan Forgiveness Application
The Small Business Administration and Treasury Department on Friday, May 15th, released the PPP Loan Forgiveness Application for business owners to complete in order to have their Paycheck Protection Program loans forgiven. The borrower is to complete the application, which is to be submitted to their lender, who will ultimately be responsible for assessing forgiveness.
The form and instructions include several measures to reduce compliance burdens and simplify the process for borrowers, including:
- Options for borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles
- Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the eight-week period after receiving their PPP loan
- Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness
- Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30
- Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined
The application requires that borrowers submit the forgiveness calculation form and Schedule A which is used to calculate the full time employee equivalent (FTEE). The form also notes that an equivalent report from a payroll processor (such as ADP or Paychex) can be submitted with the FTEE calculation.
The PPP loan forgiveness form gives borrowers the option to calculate payroll costs using an “alternative payroll covered period” that aligns with the borrowers’ regular payroll cycles. If the business processes payroll bi-weekly, they can begin the 8-week payroll covered period on the first payroll date following the date the PPP funds were received. This may allow for more covered expenses to be forgiven rather than beginning the 8-week payroll covered period on the date the funds were actually received.
Notably, the form asks whether borrowers received a loan in excess of $2 million. The Treasury has indicated that it plans to audit all loans over $2 million. A safe harbor was established by the SBA for businesses with loans less than $2 million. The new guidance was posted in an updated version of PPP loan FAQs which states, in FAQ 41, the following:
Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith. SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity.
Forgiveness will be prorated if payroll is not maintained at levels seen before February 15, 2020 – so it will be reduced proportionally to how many jobs were cut or the amount by which salaries were reduced. It will also be reduced if you do not follow the allocation specifications of 75% or more for payroll and associated costs and no more than 25% for rent, mortgage interest, and utilities.
The government has said that more guidance will be forthcoming to assist both borrowers and lenders as they begin the process