Paycheck Protection Program Loan Forgiveness Application
The SBA’s form Loan Forgiveness Application was released Friday, May 15, 2020. As was the case with the PPP application, each lender may use their own version of the application, including via online application. Remember that under the terms of the CARES Act, the lender has 60 days after receipt of the application to make a determination and the SBA has an additional 90 days after the lender’s determination to fund the lender.
- Borrowers will indicate whether they, together with their affiliates, received PPP loans in excess of $2 million. Note that you do not need to consider the loans received by affiliates if you are subject to the CARES Act waiver on affiliate rules (available for business concerns with not more than 500 employees that have a NAICS code beginning with 72 (hotels and accommodations); businesses listed on the SBA’s franchise directory and businesses that receive financial assistance from an SBIC);
- Borrower must make certifications:
- Requested forgiveness amount was used on eligible purposes (including “payroll costs to retain employees”); includes all necessary reductions based on reductions in workforce and salary/wage; does not include nonpayroll costs in excess of 25% of the forgiveness amount; does not include compensation in excess of $15,385 per person ($100,000 annualized);
- If funds were used for unauthorized purposes, the federal government may pursue recovery of loan amounts and/or civil or criminal fraud charges;
- Borrower has accurately verified the payments for payroll and nonpayroll costs for which it is requesting forgiveness;
- Required documentation verifying payroll costs and eligible nonpayroll costs has been submitted to the Lender;
- Information in application and supporting documentation is true and correct in all material respects. Borrower acknowledges that knowingly making a false statement is punishable under the law;
- Tax documents submitted to the lender are consistent with the documents submitted to the IRS or state or similar taxing authority. Lender may share tax information with the SBA and its authorized representatives;
- SBA may request additional information and 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 loan forgiveness application.
- FTEs calculated one of two ways (at election of borrower):
- For each employee enter average number of hours paid per week, divide by 40 and round to the nearest tenth, up to a maximum of 1.0;
- Assign 1 for each employee over 40 hours, and .5 for each employee under 40 hours.
- Calculating Payroll Costs: Normally the “covered period” is the 8 week (56-day) period beginning on the date the loan is disbursed. The application introduces an “alternative payroll covered period” for borrowers who pay biweekly or more frequent payroll schedule. They may use the 56-day period that begins on the first day of their first pay period following the PPP loan disbursement date.
- The application clarifies that payroll costs and nonpayroll costs may be counted if they are actually paid, or incurred (but unpaid), during the covered period or the alternative payroll covered period, as applicable.
- The application has detailed worksheets for calculating loan forgiveness amounts as well as the reduction in loan forgiveness that result from reductions in workforce or wages/salaries.
- The “cure provision” applicable to the workforce or wage/salary reduction penalties seems to be applied separately to workforce reductions and wage/salary reductions. In other words, it seems like you could cure reductions in workforce but not cure wage/salary and vice versa.
- You should fully review the list of required documentation and documents that the borrower must maintain but is not required to submit. All records relating to the PPP loan must be held for 6 years after the loan is forgiven or repaid in full, and provided to the SBA or its representatives upon request:
Documents that Each Borrower Must Submit with its PPP Loan Forgiveness Application
PPP Loan Forgiveness Calculation Form
PPP Schedule A
Payroll: Documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period or the Alternative Payroll Covered Period consisting of each of the following:
- Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
- Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:
- Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and
- State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
- Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the Borrower included in the forgiveness amount (PPP Schedule A, lines (6) and (7)).
FTE: Documentation showing (at the election of the Borrower):
- the average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019;
- the average number of FTE employees on payroll per month employed by the Borrower between January 1, 2020 and February 29, 2020; or
- in the case of a seasonal employer, the average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019; between January 1, 2020 and February 29, 2020; or any consecutive twelve-week period between May 1, 2019 and September 15, 2019.
The selected time period must be the same time period selected for purposes of completing PPP Schedule A, line 11. Documents may include payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941) and state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state. Documents submitted may cover periods longer than the specific time period.
Nonpayroll: Documentation verifying existence of the obligations/services prior to February 15, 2020 and eligible payments from the Covered Period.
- Business mortgage interest payments: Copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
- Business rent or lease payments: Copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the Covered Period; or lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.
- Business utility payments: Copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments.
Documents that Each Borrower Must Maintain but is Not Required to Submit
PPP Schedule A Worksheet or its equivalent and the following:
- Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 1, including the “Salary/Hourly Wage Reduction” calculation, if necessary.
- Documentation supporting the listing of each individual employee in PPP Schedule A Worksheet Table 2; specifically, that each listed employee received during any single pay period in 2019 compensation at an annualized rate of more than $100,000.
- Documentation regarding any employee job offers and refusals, firings for cause, voluntary resignations, and written requests by any employee for reductions in work schedule.
- Documentation supporting the PPP Schedule A Worksheet “FTE Reduction Safe Harbor.”
All records relating to the Borrower’s PPP loan, including documentation submitted with its PPP loan application, documentation supporting the Borrower’s certifications as to the necessity of the loan request and its eligibility for a PPP loan, documentation necessary to support the Borrower’s loan forgiveness application, and documentation demonstrating the Borrower’s material compliance with PPP requirements. The Borrower must retain all such documentation in its files for six years after the date the loan is forgiven or repaid in full, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request.