SBA PPP – Loan Forgiveness*

 The Small Business Administration (SBA) published the Paycheck Protection Program (PPP) Loan Forgiveness Application* 

 On May 15, 2020, the SBA published the PPP Loan Forgiveness Application for borrowers. The Loan Forgiveness Application has four components, two of which must be submitted to the borrower’s lender: 

  • PPP Loan Forgiveness Calculation Form (must be submitted to lender); 
  • PPP Schedule A (must be submitted to lender); 
  • PPP Schedule A Worksheet (to be completed and retained by borrower for records);
  • PPP Borrower Demographic Information Form (optional). 

 Key Developments 

  • Borrowers with a biweekly or more frequent payroll schedule may choose between the Covered Period (eight weeks from the date of PPP loan disbursement) and the Alternative Payroll Covered Period (eight weeks from the first day of the borrower’s first pay period following the PPP loan disbursement date) when given the option by the PPP Loan Forgiveness Application. 
  • Eligible payroll costs include both (a) those payroll costs that are paid during the Covered Period (or Alternative Payroll Covered Period) and (b) payroll costs that have been incurred during the Covered Period (or Alternative Payroll Covered Period) if paid on or before the next regular payroll date. Payroll costs that have been both incurred and paid during the Covered Period (or Alternative Covered Period) may only be counted once. 
  • Eligible nonpayroll costs include covered mortgage obligations, covered rent obligations, and covered utility payments that have been (a) paid during the Covered Period or (b) incurred during the Covered Period and paid on or before the next regular billing date (even if the billing date is after the end of the Covered Period). Nonpayroll costs that have been both incurred and paid during the Covered Period may only be counted once. 
  • The loan forgiveness amount is the lesser of the (i) loan amount, (ii) modified loan amount based on adjustments for full-time equivalency (FTE) and salary and hourly wage reductions, and (iii) total payroll costs divided by 0.75. 

 PPP Loan Forgiveness Application Components 

 PPP Loan Forgiveness Calculation Form 

  • Includes fields for identifying information of the borrower and the borrower’s PPP loan 
  • Provides calculation of the forgiveness amount based on inputs from the PPP Schedule A (described in more detail below) and other direct inputs by the borrower 
  • Contains the required representations and certifications to be made by the borrower to apply for forgiveness, including that the amount of forgiveness requested fits all necessary PPP criteria and that all information included within the application is true and correct subject to penalty by imprisonment and/or fines 

PPP Schedule A 

  • Contains fields to capture information to calculate payroll costs and FTE based on both direct inputs by the borrower and information calculated within the PPP Schedule A Worksheet 

PPP Schedule A Worksheet 

  • Identifies totals for employee cash compensation and average FTE 
  • Provides the calculation to determine whether the borrower meets the safe harbor for FTE reduction 

PPP Borrower Demographic Information Form 

  • Includes fields for identifying information relating to demographics of the borrower’s principals and is optional for the borrower to complete 

Documentation Support 

The SBA provides instructions on what documents the borrower must submit to support PPP Schedule A inputs for payroll and FTE, including bank statements, third-party payroll servicer provider reports, tax forms, payment receipts, cancelled checks, or account statements. 

For nonpayroll costs, the borrower is to submit documentation that verifies the existence of obligations and/or services prior to February 15, 2020 including, but not limited to, amortization schedules for mortgage interest payments, lender account statements from February 2020, copies of lease agreements, and copies of invoices from February 2020 for utility payments. The borrower is to submit receipts, cancelled checks or account statements to provide support of nonpayroll costs paid or incurred during the Covered Period. 

While the borrower need not provide the PPP Schedule A Worksheet to its lender, the SBA requires that the borrower retain the proper documentation to support all of its inputs. 

The SBA requires that all documentation be retained by the borrower for six years after the date that the loan is forgiven or repaid in full. 

The borrower PPP Loan Forgiveness Application can be accessed here. 

The SBA continues to update its guidance and publish clarifying interim final rules. Please monitor for such updates here. 

If you have any questions about this alert, please contact your Bank Leumi representative. 

Bank Leumi

Leumi Group