The SBA recently released 11 pages of instructions and the application for completing the PPP loan forgiveness application. The new form is intended to help reduce compliance burdens and help simplify the process for borrowers. The form can be accessed on the SBA website.
Below are a few things to keep in mind as you are completing the application:
- The form provides step-by-step instructions for how to do the required CARES Act calculations.
- The application has four components including the loan forgiveness calculation form; schedule A and worksheet; and an optional borrower demographic information form. All borrowers have to submit the loan forgiveness calculation form and PPP schedule A.
- The total number of employees you listed on your loan application form will likely NOT agree with the number entered on your loan application. The initial guidance was not clear as to a specific date (some applications noted February 15th). Also, it was unclear as to whether the count was to be FTEs (which was not defined at the time).
- Options for borrowers to calculate payroll costs using an “Alternative Payroll Covered Period” that aligns with borrowers’ regular payroll cycles. For PPP borrowers who use a biweekly schedule (or more frequent payroll cycle), they can elect 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”).
As an example, if you received your PPP loan proceeds on Monday, April 20, and the first day of its first pay period following the PPP loan disbursement is Sunday, April 26, the first day of the alternative payroll covered period is April 26 and the last day is Saturday, June 20.
- An eligible non-payroll 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 non-payroll costs cannot exceed 25% of the total forgiveness amount. Count non-payroll costs that were both paid and incurred only once.
- Regarding the $2 million threshold, remember to check the box on the form if the loan amount (including loans to affiliates that had separate applications) is more than $2 million. If the loan is less than $2 million, the SBA views the borrower has acted in good faith.
- Regarding record keeping: All records relating to the borrower’s PPP loan including documentation submitted with the application; documentation supporting the borrower’s certifications as to the necessity of the loan request and its eligibility for a PPP loan; documentation necessary to support the borrower’s loan forgiveness application and documentation demonstrating the borrower’s material compliance with the PPP requirements. Borrower’s need to retain all documentation for six years following the date of the loan (if forgiven or repaid in full) and allow SBA representatives to access the files upon request.
Borrowers will need to submit the loan forgiveness application along with documentation to their bank and the bank will have 60 days to approve or reject the application request. As with our initial guidance, we strongly suggest that you take the necessary steps and time to ensure you’ve completed the application correctly. If you need help or have questions, please contact your Mize CPAs professional.