SBA Releases Paycheck Protection Program Loan Forgiveness Application

Last night, the SBA released the Paycheck Protection Program Loan Forgiveness Application.  This application clarifies many of the questions we had about how to calculate loan forgiveness.

Click here to download the entire PPP Loan Forgiveness Application from the SBA Website.

The sixteen-page packet consists of the following:

  1. Loan Forgiveness Application Instruction for Borrowers
  2. Instructions for PPP Loan Forgiveness Calculation Form
  3. Forgiveness Amount Calculation
  4. Summary of Costs Eligible Forgiveness
  5. PPP Loan Forgiveness Calculation Form
  6. PPP Schedule A (with instructions)
  7. PPP Schedule A worksheet (with Instructions)
  8. PPP Borrower Demographic Information Form (optional)

All borrowers must submit 5 and 6 above to their lender. The loan forgiveness application provides the following guidance:

Covered period starts on the loan disbursement day (For example, if the Borrower received its PPP loan proceeds on Monday, April 20, the first day of the Covered Period is April 20 and the last day of the Covered Period is Sunday, June 14.)

Alternative Payroll Covered Period: For administrative convenience, Borrowers with a biweekly (or more frequent) payroll schedule may 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.

Costs Paid and Incurred: with the addition of the Alternative Payroll Covered Period and clarification on eligible payroll costs, Treasury has cleared up the question of, how to account for the statement “paid and incurred in the covered period”. Payroll costs are considered paid on the day that paychecks are distributed, or the Borrower originates an ACH credit transaction. Payroll costs are considered 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 (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date. Otherwise, payroll costs must be paid during the Covered Period (or Alternative Payroll Covered Period).

An eligible nonpayroll cost 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 the billing date is after the Covered Period. Eligible nonpayroll costs cannot exceed 25% of the total forgiveness amount. Count nonpayroll costs that were both paid and incurred only once.

FTE Reduction Safe Harbor

A safe harbor under applicable law and regulation exempts certain borrowers from the loan forgiveness reduction based on FTE employee levels. Specifically, the Borrower is exempt from the reduction in loan forgiveness based on FTE employees described above if both of the following conditions are met: (1) the Borrower reduced its FTE employee levels in the period beginning February 15, 2020, and ending April 26, 2020; and (2) the Borrower then restored its FTE employee levels by no later than June 30, 2020, to its FTE employee levels in the Borrower’s pay period that included February 15, 2020.

FTE Reduction Exceptions

Indicate the FTE of (1) any positions for which the Borrower made a good-faith, written offer to rehire an employee during the Covered Period or the Alternative Payroll Covered Period which was rejected by the employee; and (2) any employees who during the Covered Period or the Alternative Payroll Covered Period (a) were fired for cause, (b) voluntarily resigned,

or (c) voluntarily requested and received a reduction of their hours. In all of these cases, include these FTEs on this line only if the position was not filled by a new employee. Any FTE reductions in these cases do not reduce the Borrower’s loan forgiveness.

Full-Time Equivalent (FTE) Calculation

This new guidance now defines FTE as being the average number of hours paid per week per employee, divided by 40.  A simplified method that assigns a 1.0 for employees who work 40 hours or more per week and 0.5 for employees who work fewer hours may be used at the election of the Borrower.

Salary/Hourly Wage Reduction Calculation

This calculation is based on an average annualized salary or hourly wage during the covered period, compared to the average annualized salary or hourly wage during the period of 1/1/20 to 3/31/20.

At Windham Brannon, we are dedicated to keeping you up to date with the latest Covid-19 activity in our Covid-19 Resource Center. Our team is working around the clock to ensure we stay up to date on the latest guidance and information to assist you and your business during this unique time. For further assistance, please do not hesitate to reach out to your Windham Brannon advisor or email us at covid19advisory@windhambrannon.com

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