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FINALLY, Some Guidance from the Small Business Administration on Paycheck Protection Program Loan Forgiveness.

FINALLY, Some Guidance from the Small Business Administration on Paycheck Protection Program Loan Forgiveness

May 19, 2020

The Small Business Administration just released its Instructions and Application for Loan Forgiveness under the Paycheck Protection Program.  The application and instructions provide some overdue guidance for employer borrowers hoping to have all or a portion of their PPP loans forgiven. The application is made up of four parts:

  1. The PPP Loan Forgiveness Calculator (mandatory);
  2. PPP Schedule A (mandatory);
  3. PPP Schedule A Worksheet (optional); and
  4. Borrower Demographic Information Form (optional).

The Loan Forgiveness Calculator, Schedule A and the Worksheet provide a step by step process for reporting costs, employment levels and calculating potential forgiveness.  In determining eligibility for forgiveness, the application takes into consideration payroll costs, business mortgage costs, rent or lease payments for real or personal property and business utility payments during the covered period.  In addition to wages, eligible payroll costs include employer contributions to health insurance plans, employer contributions to employee retirement plans and employer paid state and local taxes, exclusive of any taxes withheld from employee wages.  At least 75% of the potential forgiveness amount must be for payroll costs.  Economic Injury Disaster Loan Advances will be deducted from the forgiveness amount where applicable. The “Covered Period” is defined as the eight-week period (56 days) from the date of disbursement of the loan.  An “Alternative Payroll Covered Period” provides an option for those employers using a biweekly or other pay period to use the eight-week period beginning with the first day of the first pay period after receipt of loan proceeds. Key components to eligibility for loan forgiveness include changes in total employment headcount and any reductions in salary and/or wage rates.  Headcount change exceptions include employees who decline to return to work despite a good faith written offer to re-hire during the covered period; employees fired for cause; employees who voluntarily resign; and employees who voluntarily requested a reduction in hours.  There is also Safe Harbor for those employers that reduced staff between February 15, 2020 and April 26, 2020.  Employer borrowers will remain eligible for loan forgiveness if staffing levels return to February 15 levels by June 30, 2020. Employer borrowers may apply electronically or in hard copy directly to the Lender and   should be prepared to provide the following supporting documents:

  1. Payroll records, including bank statements or reports from third party payroll services;
  2. Tax forms covering any portions of the Covered Period or Alternative Covered Period;
  3. Documents evidencing average number of employees during all relevant time periods;
  4. Payment receipts and/or cancelled checks reflecting mortgage, rent, lease and utility payments; and
  5. Verification that all mortgage, rent, lease and utility obligations existed prior to February 15, 2020.

A link to the application can be found here: https://www.sba.gov/document/sba-form–paycheck-protection-program-loan-forgiveness-application If you have any questions about the PPP Loan Forgiveness Application or other issues, please contact Peter Bennett (pbennett@thebennettlawfirm.com) or Rick Finberg (rfinberg@thebennettlawfirm.com).

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