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Small Business Administration Releases Paycheck Protection Program Loan Forgiveness Application

Small Business Administration Releases Paycheck Protection Program Loan Forgiveness Application

Home » Blog » Small Business Administration Releases Paycheck Protection Program Loan Forgiveness Application

On Friday, May 15, 2020, the Small Business Administration (SBA), in consultation with the Department of the Treasury, released the Paycheck Protection Program (PPP) Loan Forgiveness Application, along with detailed instructions on how to complete the form.

The much anticipated application and guidance walks borrowers through the process of applying for forgiveness of PPP loans in accordance with the Coronavirus Aid, Relief, and Economic Security (CARES) Act. In a press release issued by the Department of the Treasury, the SBA “will also soon issue regulations and guidance to further assist borrowers as they complete their applications, and to provide lenders with guidance on their responsibilities.”

 The CARES Act provided small businesses that have 500 or less employees the opportunity to apply for the PPP, administered by the SBA. Unlike the SBA’s Economic Injury Disaster Loan (EIDL), PPP loans are issued by SBA-accredited banks and financial institutions. The main purpose of the PPP is to assist small businesses in maintaining their workforce during the COVID-19 pandemic. Businesses that comply with requirements in accordance to the CARES Act may have their loans forgiven. Those requirements include using 75% of the loan to fund payroll-related expenses, including salaries, wages, and commissions; employee benefits; and state and local taxes. The remainder of the loan may be used for other qualifying expenses, such as mortgage payments, leases, and utilities. Funds must be used within an eight week period from the date they are dispersed by lender. At the end of the eight weeks, borrowers may submit the forgiveness application to their lender for consideration.

There are four parts to the 11-page forgiveness application, with each section including a set of detailed instructions:

  • PPP Loan Forgiveness Calculation Form
  • PPP Schedule A
  • PPP Schedule A Worksheet
  • PPP Borrower Demographic Information Form (Optional)

The Loan Forgiveness Calculation Form and Schedule A are required by lenders in order for forgiveness consideration. Instructions for the calculation form indicates that the borrower must enter eligible payroll costs incurred during the eight-week covered period, which begins the day loan proceeds are received; however, there is an allowance for an alternative payroll covered period, enabling borrowers with biweekly payroll schedules to calculate eligible payroll costs beginning on the first day of their first pay period. Borrowers that choose to use the Alternative Payroll Covered Period should read the instructions for doing so carefully.

The instructions also require borrowers that received PPP loans in excess of $2 million (together with its affiliates) to check a box.

The instructions for PPP Schedule A includes how to calculate whether a borrower’s loan forgiveness will be reduced due to failure to comply with salary/hourly wage requirements. If the borrower restored salary/hourly wages to previous amounts, they may be eligible for elimination of the salary/hourly wage reduction amount. In addition, the salary/hourly wage safe harbor applies for eligible employees whose wages were not reduce by more than 25% during the Covered Period or alternative Payroll Covered Period as compared to the period of January 1, 2020 through March 31, 2020.

Instructions for PPP Schedule A also covers calculations of full-time employees (FTEs), and provide instructions on how to report FTE Reduction Exceptions, including:  

  • any positions for which the borrower made a good-faith, written offer to rehire an employee during the Covered Period or the Alternative Payroll Covered Period which was rejected by the employee; and
  • any employees who during the Covered Period or the Alternative Payroll Covered Period
    • were fired for cause
    • voluntarily resigned, or
    • voluntarily requested and received a reduction of their hours

 Price Kong can help you navigate the complexities of the PPP Loan Forgiveness Application and Instructions. Contact us at 602.776.6300 or visit pricekong.com for more information.