On May 15th, the Small Business Administration (SBA) along with the U.S. Department of the Treasury released the long awaited Paycheck Protection Program Loan Forgiveness Application along with detailed instructions.

Here are the highlights:

  • The borrower is expected to complete the application and submit it to their lender, who will ultimately be responsible for assessing forgiveness.
  • The process can be completed electronically.
  • The application requires that borrowers submit the forgiveness calculation form and an additional schedule.
  • Application allows an option that lets small businesses calculate payroll costs using an “alternative” eight-week covered period that aligns with their regular payroll cycles.
  • Borrowers will be able to count any payroll and eligible non-payroll expenses incurred, but not paid during the covered period, as long as they are paid by the next regular payroll or billing date.
  • The form asks whether borrowers received a loan in excess of $2 million.
  • The application includes a safe harbor, which exempts certain borrowers from the loan forgiveness reduction based on FTE (Full-time Equivalent) employee levels.  Specifically, the Borrower is exempt from the reduction in loan forgiveness based on FTE employees described above if both of the following conditions are met: (1) the Borrower reduced its FTE employee levels in the period beginning February 15, 2020, and ending April 26, 2020; and (2) the Borrower then restored its FTE employee levels by no later than June 30, 2020 to its FTE employee levels in the Borrower’s pay period that included February 15, 2020.
  • Application includes a FTE Reduction Exception: Indicate the FTE of (1) any positions for which the Borrower made a good-faith, written offer to rehire an employee during the Covered Period or the Alternative Payroll Covered Period which was rejected by the employee; and (2) any employees who during the Covered Period or the Alternative Payroll Covered Period (a) were fired for cause, (b) voluntarily resigned, or (c) voluntarily requested and received a reduction of their hours.  In all of these cases, include these FTEs on this line only if the position was not filled by a new employee.  Any FTE reductions in these cases do not reduce the Borrower’s loan forgiveness.
  • FTE’s are based on 40 hours per week, which differs from original guidance.
  • There is still no guidance on self-rentals.
  • There was no mention of an extension to the eight week covered period.

Here is a link to the press release: https://home.treasury.gov/news/press-releases/sm1010

More importantly here is a link to the application and instructions https://content.sba.gov/sites/default/files/2020-05/3245-0407%20SBA%20Form%203508%20PPP%20Forgiveness%20Application.pdf

On May 22nd by the SBA released an interim final rule (IFR) covering the forgiveness process. The IFR provides the formal guidance to go with the application package. it can be found here: SBA Interim Final Rule Covering the PPP Loan Forgiveness Process

Stay tuned as always, the SBA will soon issue additional regulations and guidance to further help borrowers complete their applications for loan forgiveness and to provide lenders with guidance on their responsibilities.