On Friday, May 15, the Small Business Administration (SBA), in consultation with the Treasury, released an application form and instructions for PPP loan forgiveness. The application has four components: the PPP Loan Forgiveness Calculation Form, PPP Schedule A, the PPP Schedule A Worksheet, and an optional PPP Borrower Demographic Information Form. Borrowers are required to submit the PPP Loan Forgiveness Calculation Form and PPP Schedule A to their lender.
It is worth noting that for borrowers who, along with their affiliates (as defined in the SBA's April 15 Interim Final Rule), received loans over $2 million, the application form includes a checkbox that requires the borrower to note that its loan size exceeded this threshold, which the SBA previously indicated it will review.
The loan forgiveness application form and instructions also include several measures to simplify compliance burdens and address some of the open questions regarding forgiveness, including:
- Options for borrowers to calculate payroll costs using an "alternative payroll covered period" that aligns with borrowers' regular payroll cycles.
- Flexibility to include eligible payroll and related expenses paid within a certain time frame after the conclusion of the eight-week covered period.
- Full-time equivalent (FTE) employees are based on a 40 hour (maximum) work week.
- Clarification on how to calculate the loan forgiveness reductions based on FTEs and salary/wage reductions.
- Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30.
- How to apply the new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined.
- Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness.
The SBA also noted that it plans to provide additional guidance shortly to assist borrowers as they complete their loan forgiveness applications. It did not provide a date by which it expects to release this guidance.
There are growing calls from lawmakers and government officials to expand the eight-week timeframe as well as to modify the 75 percent of loan proceeds required to be spent on payroll costs. However, no formal proposals have yet been issued to that effect.
We expect additional guidance to continue to be issued by the SBA and/or the Treasury in the coming days. We are actively monitoring the situation and will keep you apprised of any developments.
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