SBA Paycheck Protection Program (PPP): SBA Publishes Loan Forgiveness Application and Instructions for Borrowers

Wilson Sonsini Goodrich & Rosati

Wilson Sonsini Goodrich & Rosati

Late Friday evening, May 15, 2020, the Small Business Administration (SBA), in consultation with the Department of the Treasury, published its long-awaited Paycheck Protection Program (PPP) Loan Forgiveness Application, as well as detailed instructions and worksheets to assist borrowers in filling out the application. A copy of the application and instructions can be found here. The SBA also announced that it will issue further guidance and regulations in the near future to further assist borrowers in completing the forgiveness application and to guide lenders in how to carry out their responsibilities in processing the loan forgiveness applications.

The application form and instructions include a number of measures intended by the SBA to reduce compliance burdens and simplify the process for borrowers applying for forgiveness, including:

  • Options for borrowers to calculate payroll costs using an "alternative payroll covered period" that better aligns with borrowers' regular payroll cycles;
  • Flexibility to include eligible payroll and non-payroll expenses on both a paid and incurred basis during the eight-week (56-day) covered period after receiving their PPP loans;
  • Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness;
  • Borrower-friendly implementation of statutory exemptions from the formula that would otherwise cause a reduction in loan forgiveness based on rehiring by June 30; and
  • The addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined, consistent with the SBA's FAQ #40.

In order to apply for PPP loan forgiveness, borrowers are required to fully complete both 1) the PPP Loan Forgiveness Calculation Form and 2) PPP Schedule A. It is important to note that the PPP Loan Forgiveness Calculation Form requires the applicant to state whether or not the borrower's PPP loan (together with any PPP loan received by one or more of its affiliates, if applicable) is in excess of $2 million and make a number of certifications about the accuracy of the information submitted with the application and other matters, including that the funds were only used for authorized purposes and that the amounts applied for are eligible for forgiveness. Borrowers must then submit both the completed PPP Loan Forgiveness Calculation Form and PPP Schedule A to the same lender who originated the borrower's PPP loan along with all documents listed on page 10 of the form application and instructions under the heading "Documents that Each Borrower Must Submit with its PPP Loan Forgiveness Application." Borrowers are also required to maintain, but not submit with the application, the documents listed at the bottom of page 10 of the application and instructions under the heading "Documents that Each Borrower Must Maintain but is not Required to Submit."

Borrowers are required to maintain this latter category of documents for six years after the loan is forgiven or repaid in full, and permit authorized representatives of the SBA, including representatives of its Office of Inspector General, to access such files upon request.

The instructions published by the SBA are detailed and all borrowers intending to apply for PPP loan forgiveness are encouraged to review them carefully and consult with their legal and/or financial advisors if they have any questions prior to applying for forgiveness.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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