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Highly Anticipated PPP Loan Forgiveness Application is Released by the SBA

The Small Business Administration (“SBA”) released its Paycheck Protection Program (“PPP”) Loan Forgiveness Application.

The Loan Forgiveness Application can be found here. Notably, the Loan Forgiveness Application answers some questions about the timing of various qualified payments that are eligible for forgiveness. You will recall that, under the PPP, qualified expenses that are “paid or incurred” within the eight week period (the “Covered Period”) from disbursement of the loan proceeds are eligible for forgiveness, subject to certain adjustments.

The Loan Forgiveness Application introduces the concept of the “Alternative Payroll Covered Period” to determine which payroll costs are eligible for forgiveness. Borrowers with biweekly (or more frequent) payroll periods are permitted to calculate eligible payroll costs using the eight week period that begins on the first day of their first pay period following the disbursement date of the loan, rather than using the normal Covered Period. Using the Alternative Payroll Covered Period may eliminate the need for borrowers to have a special payroll to capture all eligible payroll costs within the normal Covered Period. However, borrowers should be mindful that, if the Alternative Payroll Covered Period is elected, it must be used consistently throughout the Loan Forgiveness Application unless the Application specifically requires the use of the Covered Period.

The Loan Forgiveness Application also provides that eligible nonpayroll costs must either: 1) be paid during the Covered Period, or 2) be incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period. This instruction appears to imply that nonpayroll costs that were incurred prior to the Covered Period but not paid until the covered period are eligible for loan forgiveness (for example, if a borrower deferred payment of March or April rent, but then received a PPP loan in May, the borrower could pay March and April rent during the Covered Period and request forgiveness of those amounts). However, additional guidance from the SBA is needed to confirm this interpretation. This instruction also prohibits borrowers from prepaying rent and utilities beyond the Covered Period because those costs would not be “incurred” during the Covered Period. Borrowers should be mindful that nonpayroll costs cannot exceed 25% of the total forgiveness amount.

The Loan Forgiveness Application also provides a worksheet for employers to calculate the number of full-time equivalent (“FTE”) employees. Under the formula set out in the worksheet, the number of hours paid to each employee per week is divided by 40 and rounded to the nearest tenth, with the maximum for any one employee being 1.0. The sum of all employees is then use to determine the borrower’s FTE count for that week. This figure is used to determine whether loan forgiveness must be reduced. If a borrower restores its FTE count to the FTE count that existed during the February 15, 2020 payroll period on or before June 30, 2020, the borrower will be exempt from any reduction in forgiveness as a result of the borrower’s FTE count.

Finally, the Loan Forgiveness Application includes a list of documentation that borrowers will be required to submit in support of the request for loan forgiveness.

What Does This Mean For You? If your business has received a PPP loan, you should review the Loan Forgiveness Application and start gathering the information and documents that will be required to substantiate your request for loan forgiveness. You should also be mindful that the Loan Forgiveness Application may be revised or updated by the SBA. The PPP Loan Application was revised and published a few times prior to the final version being issued. It is also anticipated that the SBA will continue to update its Frequently Asked Questions, which can be located here. Borrowers are encouraged to check the FAQs frequently.

If you have questions about this or any other business matter, please contact Grace Nguyen Bond at or 717-509-7226.

**This update is provided for informational purposes only and should not be construed as legal advice or as creating an attorney-client relationship where one does not already exist. This article was published on May 22, 2020. Please be aware that the laws and regulations related to the COVID-19 pandemic are being updated rapidly. Please check back or contact us for the most up-to-date information.**