On May 15, 2020, the Small Business Administration (“SBA”) issued its Paycheck Protection Program (“PPP”) Loan Forgiveness Application and related instructions. Organizations that received a PPP Loan must complete this Application and submit it to their lender to apply for forgiveness of that PPP Loan. The Application and related instructions can be found here.
The Application consists of four components:
Borrowers can submit all four documents to their lenders but are only required to submit their completed PPP Loan Forgiveness Calculation Form and the PPP Schedule A, as well as supportive documentation.
Payroll Costs – Borrowers must identify their eligible payroll costs in the Application. SBA can forgive up to 75% of the borrower’s total eligible payroll cost during the eight-week forgiveness period. SBA gives borrowers a choice to have that PPP loan eight-week forgiveness period begin on the same day the lender disbursed the PPP loan, or borrowers may choose an alternative payroll covered period that begins on the first day of their first pay period following the lender’s disbursement of the PPP loan.
Borrowers must complete PPP Schedule A to determine the total eligible payroll costs incurred during the eight-week covered period. The PPP Schedule A Worksheet requires borrowers to list individual payment information for each employee during the eight-week period, including whether an employee is a full-time equivalent (“FTE”) employee. Borrowers must also include any wage reduction information in its payroll costs calculation, such as for employees who earn over $100,000 annual salary, or if any employee salaries were reduced by more than 25% compared to their January 1 to March 31, 2020, earnings. SBA provides an FTE Reduction Safe Harbor where Borrowers will not have loan forgiveness amounts reduced if it laid off FTEs between February 15, 2020, and April 26, 2020, but restores its FTE levels to its February 15, 2020, amounts by June 30, 2020. Borrowers can count employees who were offered to be rehired and refused, were involuntarily separated for cause, or voluntarily resigned, to calculate its FTE levels.
Nonpayroll Costs – Borrowers must include information in the Application on their nonpayroll expenses during this eight-week period, including mortgage interest, rent payments, and utility payments. Borrowers do not need to include information on mortgage interest, rent, or utility payments during the eight-week period if they will not seek forgiveness of those amounts. Nonpayroll costs cannot make up more than 25% of the total forgiveness amount.
Additional Certifications and Information – Borrowers must indicate if their original PPP loan amount exceeded $2 million. SBA will review all loans in excess of $2 million to ensure the borrower made a good-faith certification related to their need for the loan. SBA recently stated that it will deem all borrowers obtaining loans less than $2 million made the required good faith certifications needed for that loan.
Borrowers must further certify that they accurately verified all payments and that the amount for which forgiveness is requested was used to pay eligible costs and includes all applicable reductions. Borrowers will need to submit applicable payroll, FTE, nonpayroll, and related information along with their Application.
Upon receipt of the Application, SBA and the lender will evaluate a borrower’s eligibility for loan forgiveness in accordance with the PPP regulations and guidance issued by SBA as of the date of the borrower’s application. SBA intends to issue additional regulations and guidance in the near future to assist borrowers and lenders. Borrowers must keep all documentation related to the PPP loan and Application for six years after the date the loan is forgiven or repaid in full, and must permit SBA to access this documentation upon request.