SBA Releases Paycheck Protection Program Loan Forgiveness Application
On Friday, May 15, 2020 the U.S. Small Business Administration released the Paycheck Protection Program Loan Forgiveness Application. The application, in its instructions, provides some much-awaited guidance, including:
- Loan Disbursement date is the earliest date that the loan was funded even if there was more than one funding date. You may have received your funds in two increments if you were eligible for an increase in your loan amount due to clarifications issued after your initial funding date.
- Establishes an Alternative Payroll Covered Period, which allows borrowers with a biweekly (or more frequent) payroll schedule to elect to calculate eligible payroll costs using the eight-week (56-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date (the “Alternative Payroll Covered Period”).
- For example, if the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20.
- Borrowers who elect to use the Alternative Payroll Covered Period must apply the Alternative Payroll Covered Period wherever there is a reference in this application to “the Covered Period or the Alternative Payroll Covered Period.” However, Borrowers must apply the Covered Period (not the Alternative Payroll Covered Period) wherever there is a reference in this application to “the Covered Period” only.
- For purposes of forgiveness, eligible costs, including payroll costs, are included if they are paid on or before the next regular payroll or billing date.
- Rent or lease payments, including those related to business personal property, may be included as long as they were in place prior to February 15, 2020.
The one item that was not addressed in the Paycheck Protection Program Loan Forgiveness Application is whether a borrower must use 75% of the loan proceeds for payroll costs in order to have any portion of the loan forgiven. While it was not specifically addressed, the mechanics of the SBA application do not limit forgiveness based on the total proceeds. The limitations imposed by the application relate to the following:
- Non-payroll costs are limited to 25% of total forgiveness
- Employee FTE count
- Reduction in salary and wages in excess of 75%
On May 19, 2020, Delap hosted a webinar addressing this new PPP Loan Forgiveness Application guidance.
On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act of 2020, a new law that eases restrictions and contains borrower-friendly changes to the Paycheck Protection Program. Delap held a webinar on June 10, 2020, to review the changes of the Paycheck Protection Program Flexibility Act. Watch the recording here.
The PPP Loan Forgiveness Application was updated as of June 16, 2020. Here is a link to the revised application.