PPP Forgiveness Application

COVID-19 Resources

On May 15^th, the SBA released an application for PPP borrowers seeking loan forgiveness. The application form is available on the United States Treasury’s website or from PPP lenders and should be submitted to the lending institution once completed. The application form provides some noteworthy PPP updates, including the following:

• Introduction of an optional eight-week “covered period” for calculating payroll costs in certain situations. While prior regulations indicated that the eight-week “covered period” must begin on the date that PPP funds are disbursed, the forgiveness application allows PPP borrowers with bi-weekly or weekly payroll cycles the option of using an alternative eight-week covered period that begins on the first day of the first pay period following the PPP loan disbursement date. This special rule applies only to payroll costs and does not apply to eligible nonpayroll costs.
• Clarity on the extent to which eligible payroll and nonpayroll costs must be paid and/or incurred during the covered period. Specifically, the application states that payroll costs are considered paid on the day that paychecks are distributed or the date on which the PPP borrower originates an ACH credit transaction for payroll. Payroll costs are considered to be incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the Borrower’s last pay period of the covered period (including, if applicable, an alternative covered period as described above) are eligible for forgiveness if paid on or before the next regular payroll date.  For nonpayroll costs, the application indicates that eligible nonpayroll costs must be paid during the covered period or incurred during the covered period and paid on or before the next regular billing date (even if that billing date occurs after the covered period).
• Confirmation that eligible nonpayroll costs still cannot exceed 25% of the total forgiveness amount.  
• Confirmation that there is a cap on loan forgiveness of $15,385 per employee, self-employed individual and partner.  In other words, a cap based on eight weeks of compensation at a maximum annualized rate of $100,000 per year.
• Providing a method for determining the number of full-time equivalent employees (FTEs) for purposes of calculating any deductions to eligible loan forgiveness.  Specifically, PPP borrowers are instructed to calculate FTEs by entering the average number of hours paid per week per employee, dividing by 40, and rounding the total to the nearest tenth. The maximum for each employee is capped at 1.0. For example, an employee who works 30 hours in a week would be treated as 0.8 in that week. This methodology differs from that required to calculate FTEs in certain other contexts, including for purposes of the Affordable Care Act.