On Friday, May 15, 2020, the SBA released the PPP Loan Forgiveness Application. A copy of the application and instructions is available here.
The Application sets forth the documentation required to verify expenses for purposes of the forgiveness calculation. The Application also clarifies a few points regarding forgiveness, including:
- For administrative convenience, borrowers with biweekly payroll may elect to calculate eligible payroll costs using the 8-week period that begins on the first day of their first pay period following disbursement of the loan (“Alternative Payroll Covered Period”);
- Mortgage obligations include payments of interest on real and personal property, but the obligation must have been in place prior to February 15, 2020.
- Owner-employee or self-employed individual/general partners must not exceed eight weeks’ worth of 2019 compensation during the 8-week period.
- Non-cash compensation payroll costs are limited to employer contributions for employee health insurance and employee retirement plans, and employer state and local taxes assessed on employee compensation.
- Full time equivalents (“FTEs”) are considered on a 40 hour per-week basis.
- For the salary reduction calculation, borrowers must compare the average annual salary or hourly wage from January 1, 2020 to March 31, 2020 to the average annual salary or hourly wage during the 8 week-period.
- For the FTE forgiveness calculations, the rehired employee safe harbor and FTEs are counted as of June 30, 2020.
We are pleased that the application has provided an Alternative Payroll Covered Period. This is defined as “For administrative convenience, Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the eight-week (56-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date (the “Alternative Payroll Covered Period”). For example, if the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20.” The Alternative Payroll Covered Period only relates to payroll costs and not other costs which could justify a portion of the forgiveness.
The application includes the following certification:
“I understand, acknowledge, and agree that SBA may request additional information for the purposes of evaluating the Borrower’s eligibility for the PPP loan and for loan forgiveness, and that the Borrower’s failure to provide information requested by SBA may result in a determination that the Borrower was ineligible for the PPP loan or a denial of the Borrower’s loan forgiveness application.” Additionally, “The Borrower’s eligibility for loan forgiveness will be evaluated in accordance with the PPP regulations and guidance issued by SBA through the date of this application. SBA may direct a lender to disapprove the Borrower’s loan forgiveness application if SBA determines that the Borrower was ineligible for the PPP loan.”