SBA and Treasury Release PPP Loan Forgiveness Application

On May 15, 2020, the Small Business Administration (“SBA”), in consultation with the Department of the Treasury, released the PPP Loan Forgiveness Application and related forms and instructions. The application and forms instruct borrowers how to calculate and apply for loan forgiveness and specify the supporting documentation to be submitted to lenders. Key aspects of the application and instructions include the following:

  • Borrowers must calculate payroll costs over the course of a single, consecutive eight-week period, but they may choose to include those costs either:
    • During the “Covered Period,” which begins on the PPP loan disbursement date and ends 56 days later; or
    • During an “Alternative Covered Period,” which begins on the first day of the borrower’s regular pay period following the PPP loan disbursement date and ends 56 days later.
  • Borrowers may include eligible payroll and nonpayroll costs paid or incurred during the Covered Period or the Alternative Covered Period, as long as costs incurred during the period are paid by the next regular billing date, and any eligible cost is only counted once.
  • PPP loan forgiveness conditioned upon borrower’s retention of the same number of Full Time Equivalent (“FTE”) employees will not be reduced if:
    • Borrower meets the requirements of the FTE Reduction Safe Harbor by restoring FTE levels by no later than June 30, 2020; or
    • With respect to any position for which the Borrower made a good-faith, written offer to rehire an employee during the Covered Period or Alternative Covered Period which was rejected by the employee; or
    • With respect to any FTE employee who, during the Covered Period or Alternative Covered Period, was fired for cause, voluntarily resigned, or voluntarily requested and received a reduction in hours.
  • Borrowers must submit to their lender detailed documentation including bank account statements or payroll service provider reports, payroll tax forms, payment receipts documenting contributions to health insurance and other benefits, and documents supporting nonpayroll expenses such as mortgage interest payments, rent or lease payments and utility payments.
  • Borrowers must retain, but are not required to submit to their lender, all records relating to the PPP loan and forgiveness applications for 6 years after the date that the loan is forgiven or repaid in full.
  • There is specific guidance on calculating “Average FTE” from employees who work less than 40 hours/week (See Table Instructions of Schedule A Worksheet), reducing the amount of forgiveness by the amount of EIDL Advance (See line 11 of the Calculation Form), and limiting at eight weeks’ worth of 2019 compensation the amount of owner-employee’s or self-employed individual/general partner’s income, capped at $15,385 per person (See item 1 of the Representations and Certifications).

The PPP Loan Forgiveness Application is detailed and requires a substantial amount of specific, supporting documentation. Therefore, employers should work closely with their lenders, accountants, payroll providers, and tax advisors to ensure that the process is completed thoroughly and accurately.

The legal and HR team at Lake Effect is closely monitoring the impact of COVID-19 on the workplace and will continue to provide our clients with updates as they are available. Please visit our COVID-19 resource page for all of our pandemic-related legal updates and HR best practices. The attorneys and HR professionals at Lake Effect HR & Law are ready and willing to help. Contact us at or 1-844-333-5253.

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