SBA Releases PPP Loan Forgiveness Instructions

Published Monday, May 18, 2020

On Friday, May 15th, the Small Business Administration (SBA) released much awaited instructions regarding loan forgiveness for employers’ Paycheck Protection Program (PPP) loans.

As a reminder, the PPP provides fully federally funded loans to small businesses as an incentive for these businesses to keep their employees on the payroll instead of layoffs, reducing employees’ hours, reduction in workforce, or any similar action. The PPP funds must be used over eight weeks on specific expenses including payroll, rent and utilities.

The newly released guidance gives employers step-by-step instructions including:

  • How to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness.
  • An “alternative payroll covered period” option for borrowers to calculate payroll costs so that it aligns with the employer’s regular payroll cycle.
  • Clarification that borrowers will be able to count any payroll and eligible non-payroll expenses that were incurred, but not paid, during the borrower’s last pay period of the covered period as long as such expenses are paid on or before the next payroll date.
  • A new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire an employee during the covered period or the alternative payroll covered period and the offer was rejected by the employee and for employees who were fired for cause, voluntarily resigned, or voluntarily requested and received a reduction of their hours during the covered period or alternative payroll covered period.
  • An FTE reduction safe harbor where the borrower is exempt from the reduction in loan forgiveness based on FTE employees if the borrower reduced its FTE employee levels in the period beginning February 15, 2020, and ending April 26, 2020; and the borrower then restored its FTE employee levels by June 30, 2020 to its FTE employee levels in the pay period that included February 15, 2020.

Employers can still apply for the Paycheck Protection Program (PPP) at any financial institution that is approved through the SBA. To find participating institutions, you can use the SBA’s online Lender Match Tool. Employers are eligible to apply for the PPP loan until June 30, 2020.

Please don’t hesitate to reach out if you have any questions.

Back to top