Alert: SBA Issues Loan Forgiveness Application

The Small Business Administration (SBA) has just released its Paycheck Protection Program (PPP) Loan Forgiveness Application along with instructions for borrowers on how to apply for forgiveness of such loans (for a copy of the application, please click here). The application, to be submitted by the borrower to their lender, reflects some additional clarifications and borrower-friendly guidelines which are highlighted as follows:

  1. Paid or Incurred: Despite earlier guidance and FAQ’s issued by the SBA, one question that remained was whether the payroll and nonpayroll costs eligible for forgiveness must be paid out during the 8-week “Covered Period”. The application instructions indicate that such costs may be paid or incurred during the Covered Period.
    • In the case of payroll costs, they are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not yet paid during the last pay period within the Covered Period will be eligible for forgiveness if paid on or before the next regular payroll date.
    • Nonpayroll costs may be incurred but not paid during the Covered Period and considered eligible for forgiveness so long as they are paid before the next regular billing date even where such billing date is after the Covered Period.
  2. Alternative Payroll Covered Periods: To simplify the computations for employers that may have payroll periods that are not aligned with the Covered Period, the employers may elect to compute such payroll costs using the 8-week period that begins on the first day of their first pay period following the date the PPP loan proceeds were disbursed. Where such election is made, employers must apply such Alternative Covered Payroll Period wherever referenced elsewhere.
  3. FTE Reduction Exceptions: There are certain limitations and reductions imposed on the amount of loan forgiveness where a reduction in Full Time Equivalents (FTE’s) has occurred within the specified period and such FTE’s have not been replaced or rehired by June 30, 2020. An exception to this forgiveness claw back applies where either:
    • The borrower has made a good-faith, written offer to rehire the employee during the Covered Period which was rejected by the employee, OR
    • The employees, during the Covered Period, were fired for cause, voluntarily resigned, or voluntarily requested and received a reduction in their hours.

The Application also contains a listing of the types of documents that borrowers must submit to their lenders upon applying for loan forgiveness and borrowers would be wise to begin accumulating and maintaining such documentation in advance of finalizing their application.

The SBA is still to issue additional regulations and guidance regarding loan forgiveness matters and our firm will continue to keep clients informed of such developments.  Members of the DUGGAN BERTSCH team are available to assist employers in evaluating and assessing the forgiveness requirements and limitations. Please contact your DUGGAN BERTSCH representative for more information or assistance.

Click Here to Download The PPP Loan Forgiveness Application Form

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