Paycheck Protection Program Loan Forgiveness Application

The SBA released the Paycheck Protection Program Loan Forgiveness Application which must be completed with your lender in order to have all or a portion of your PPP loan forgiven. Below are the highlights of the application. See the full SBA application here.

  1. The SBA is allowing organizations to use an Alternative Payroll Covered Period which begins on the first day of your first pay period following your PPP loan disbursement date and ends eight-weeks (56 days) after that date. From a strategy perspective you would either start with your loan disbursement date or this alternative date, probably whichever period results in more payroll expense
  2. Eligible payroll includes payroll costs paid AND payroll costs incurred during the eight-week period. Based on this definition it is possible that more than eight-weeks of actual payroll would be eligible
  3. Pertaining to allowable interest payments, the forgiveness application only asks for business mortgage interest. We will obtain further clarification if other interest expense items are allowable
  4. Compensation for owners and self-employed individuals cannot exceed eight weeks’ worth of 2019 compensation. Basically owners cannot be paid more than they were paid in 2019
  5. The application defines one FTE as an employee that works weekly hours of 40, but also allows you to use 0.5 for employees that worked less than 40 hours.
  6. Your loan forgiveness will not be reduced if you made a written offer to rehire an employee that rejected the offer, for employees fired for cause, and for employees who voluntarily resigned or requested a reduction in hours
  7. Various original documents and calculations must be submitted with your loan forgiveness application. You must also maintain various other documents as a requirement of loan forgiveness
  8. The borrower must certify that all information included on the loan forgiveness application is complete and accurate. The application includes seven items that need to be certified
  9. Application components:

              (1) PPP Loan Forgiveness Calculation Form

               (2) PPP Schedule A

               (3) PPP Schedule A Worksheet

               (4) PPP Borrower Demographic Information Form (optional)

  1. Required information to submit with application

               (1) Payroll documentation: Bank account statements, third party payroll provider                      reports, payroll tax filings (IRS Form 941), receipt of payments to employee                      health insurance and retirement plan benefits

               (2) FTE documentation: payroll documentation showing FTE calculation for both base                      periods

               (3) Non-payroll documentation:

                          + Mortgage statements from February 2020 through the covered period

                          + Rent or lease agreement and statements from February 2020 through the                              covered period

                          + Invoices and canceled checks for utility payments from February 2020 through                              the covered period

  1. Required documentation must be retained for six years after the loan is forgiven

Other RESOURCES

Frequently Asked Questions: Awaiting SBA Guidance

For payroll paid during the covered period is it based on the date paid or is it based on when the payroll was incurred? Is there a limit on how much an employee can make compared to the most recent quarter if it is not in excess of $100,000 on an annual basis? Is rent, utilities, interest, etc. in arrears eligible for forgiveness if paid during the covered period? What about amounts paid in advance? For employees laid off prior to 4/27 and hired back by 6/30 is there a time period they must remain employed in order to avoid a reduction in loan forgiveness? How do you define FTE? Is it 30, 35 or 40 hours? We know non-mortgage interest is a covered cost, but is it also eligible for forgiveness? How do you measure the 25% reduction amount for payroll? For example, from 1/1/20 to 3/31/20, do you look at number of hours, rate per hour, or just total compensation during that period? If you bonused people during Q1 of 2020 that is not a part of their normal compensation, is that included when looking at the 25% reduction for payroll? What is “transportation” with regards to being a utility? Does this include mileage, gas for vehicles, etc.? Does “rent” include all leases (building, vehicle, equipment, copiers)? If not, what does it include? If a business hires new employees after 2/15/20, can they be included in the FTE count for the 8-week period? Are there any restrictions on compensation (increases) for related parties (mother, father, brother, sister, child, etc.)?

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