PPP Loan Forgiveness Application

The Small Business Administration (SBA) issued the Paycheck Protection Program (PPP) loan forgiveness application and instructions. 

The instructions answer many questions about how to calculate the PPP loan forgiveness. Some of the guidance includes:
A description of the 8 week covered period as a 56 day period.

  • The loan recipient is provided with an election to use an alternative payroll covered period which begins on the first day of their first pay period following the PPP loan disbursement date. This election only applies to the payroll calculation.
  • The salary/hourly wage rate is used when determining if there has been a wage reduction of over 25% when compared to the first quarter of 2020.
  • Payroll costs incurred but not paid during the loan recipient’s last pay period of the 8 week period are eligible for forgiveness if paid on or before the next regular payroll date.
  • Payroll costs are considered paid on the day that paychecks are distributed or the loan recipient originates an ACH credit transaction.
  • Utility payments include electricity, gas, water, transportation, telephone, or internet access if the service began before February 15, 2020.
  • Non-payroll costs incurred during the 8 week period and paid on or before the next regular billing date, even if the billing date is after the 8 week period is an eligible cost.
  • A full time equivalent (FTE) safe harbor is provided to determine if there has been a reduction in FTEs from the reference period. The safe harbor is met if these conditions are met: 
    1. The loan recipient reduced its FTE employee levels in the period beginning February 15, 2020 and ending April 26, 2020; and
    2. The loan recipient then restores the FTE employee levels by not later than June 30, 2020 to its FTE employee levels in the pay period that included February 15, 2020.
  • FTE count is not reduced by:
    1. Any position that the loan recipient made a good-faith, written offer to rehire an employee during the 8 week period which was rejected by the employee,
    2. Any employees who during the 8 week period (a) were fired for cause, (b) voluntarily resigned, or (c) voluntarily requested and received a reduction of their hours. These employees are included in the FTE count as long as the position was not filled by a new employee.
  • A full time equivalent (FTE) safe harbor is provided to determine if there has been a reduction in salary/ wage from the reference period. The safe harbor measures the annual salary or hourly wage as of February 15, 2020 and compares it to the average annual salary or hourly wage as of June 30, 2020. If the wage on June 30, 2020 is equal to or exceeds the wage on February 15, 2020, the safe harbor is met and there would be no further reduction in the loan forgiveness.  
  • A FTE is based on 40 hours per week. A simplified method assigns a 1 for an employee that works 40 hours or more per week and .5 for employees who work fewer hours may be used at the election of the loan recipient.

The SBA guidance includes a list of documents that must be submitted, along with the application, and instructions, which can be accessed [here]. The SBA plans to release regulations and guidance soon to assist borrowers as they complete their loan forgiveness applications and instruct lenders on how to handle their responsibilities related to PPP loans.

Please contact us at 401-831-0200 if you would like discuss.

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