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Publications | May 20, 2020
3 minute read

SBA and Department of Treasury Release Paycheck Protection Program Loan Forgiveness Application and Instructions

On Friday, May 15, 2020, the Small Business Administration (SBA) and Department of Treasury released the Paycheck Protection Program (PPP) loan forgiveness application. The application includes step-by-step instructions on how to apply for and calculate PPP loan forgiveness in compliance with the Coronavirus Aid, Relief and Economic Security Act (CARES Act).

The application consists of: (1) the PPP Loan Forgiveness Calculation Form; (2) PPP Schedule A; (3) the PPP Schedule A Worksheet; and (4) the PPP Borrower Demographic Information Form (optional). All borrowers must submit (1) and (2) to their lender, together with supporting documentation, described below.

The form and instructions clarify several measures to reduce compliance burdens and simplify the forgiveness process for borrowers, including: 

  • A safe harbor from loan forgiveness reduction under certain circumstances for borrowers who re-hire employees by June 30, 2020.
  • An exemption from loan forgiveness reduction for borrowers who make a good-faith written offer to re-hire an employee that the employee rejects.
  • An exemption from loan forgiveness reduction that borrowers can utilize for employees: (a) that voluntarily quit; (b) were fired for cause; or (c) voluntarily requested a reduction in hours.
  • Guidance on how to calculate a reduction in the forgiveness amount for borrowers due to employee or wage reductions.
  • Clarification that rent obligations include leases on both real and personal property.
  • Clarification that a full-time equivalency (FTE) employee will be calculated based on a 40‑hour work week. The maximum FTE rate for each employee is capped at 1.0.
  • A “check the box” requirement for the borrower to disclose if, together with its affiliates (under the SBA's applicable PPP affiliation instructions), received loans exceeding $2 million.

Borrowers must submit the following documentation with its loan forgiveness application: 

  • Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
  • Payroll tax filings reported to the IRS and state income, payroll and unemployment insurance filings.
  • 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.
  • Documentation verifying the average number of full-time equivalent employees on payroll and pay rates for the following periods:
    • The 8-week covered period of the loan.
    • February 15, 2019, through June 30, 2019, or January 1, 2020, through February 29, 2020.
    • In the case of a seasonal employer, February 15, 2019, through June 30, 2019; January 1, 2020, through February 29, 2020; or any consecutive 12-week period between May 1, 2019, and September 15, 2019.
  • Documentation, including cancelled checks, payment receipts, transcripts of accounts or other documents verifying payments on covered mortgage obligations, payments on covered lease obligations and covered utility payments.

The application also states that the SBA will release additional regulations and guidance to further assist borrowers as they complete their applications and to provide lenders with guidance on lender requirements in the forgiveness process.

The PPP loan forgiveness application and instructions are available here.

The instructions surrounding PPP loan use and forgiveness are complex and business specific. If you have concerns about the instructions, please contact Ford TurrellTimothy Hillegonds, Rob Davies, Matthew Crowe or your Warner attorney.