Small Business Association Releases Paycheck Protection Program Loan Forgiveness Update and Clarification

On Friday, May 15, the Small Business Association (SBA) released additional clarification on the Paycheck Protection Program (PPP) Loan Forgiveness Application and instructions. Further guidance is expected from the SBA regarding forgiveness, here are some highlighted points:

  • PPP loan borrowers will need to complete a forgiveness loan application and submit it to their lender in order to request forgiveness.
  • Borrowers can use either the 8-week loan period for payroll costs OR an “Alternative Covered Payroll Period.” Employers with a biweekly or more frequent payroll schedule may elect to use an 8-week period that begins on the first day of their first pay period following the loan disbursement date as opposed to the loan disbursement date.
  • Payroll costs are to either be incurred OR paid during the Covered Period (8-week loan period) or the Alternative Payroll Period. This wording has been changed from the previous guidance stating that the payroll costs must be incurred and paid. With that being said, payroll costs incurred but not paid by the last day of the Covered Period may still include payroll costs that are paid on the next regularly schedule payroll date for forgiveness.
  • Similarly, eligible non-payroll costs can be included if they are incurred during the Covered Period but paid subsequently.
  • Calculation for full-time equivalents (FTE) has increased from 30 hours to 40 hours per 1 FTE.
  • Regarding seasonal employees, an employer may either use the 2/15/19-6/30/19, 1/1/20-2/29/20, or any consecutive twelve- week period between 5/1/19-9/15/19 as a chosen reference period when comparing to the 8-week loan period.
  • An exception to the FTE reduction calculation may be available if a position was not filled by a new employee by the June 30th safe harbor. The exception can apply if (1) the Borrower 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 or (2) any employees who, during the Covered Period or the Alternative Payroll Covered Period, were fired for cause, voluntarily resigned or voluntarily requested and received a reduction of their hours. These exceptions will not reduce a Borrower’s loan forgiveness.

Further guidance is still expected from the SBA regarding how these new changes could impact forgiveness and forgiveness calculations.

We will continue to monitor and keep you updated as additional information and guidance is released. If you have any questions or concerns, please contact us at 517.323.7500 or email: