Understanding the PPP Loan Forgiveness Application

accounting firm providing PPP Loan Forgiveness Application assistanceThe U.S. Small Business Administration (“SBA”) recently released the Paycheck Protection Program (“PPP”) Loan Forgiveness Application along, with detailed instructions, which can be found on SBA’s website as well as on the U.S. Department of Treasury’s website.

The application contains the following components:

  • PPP Loan Forgiveness Calculation Form;
  • PPP Schedule A;
  • PPP Schedule A Worksheet; and
  • PPP Borrower Demographic Information Form (optional).

According to the application instructions posted on SBA’s website, all borrowers are required to submit the PPP Loan Forgiveness Calculation Form and Schedule A to their lender, along with underlying supporting documentation. The supporting documents that Borrowers must submit with the application include:

  • Documents verifying the eligible cash compensation and no-cash benefit payments form the Covered Period or the Alternative Payroll Covered Period, including:
    1. Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
    2. Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:
      a. Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and
      b. State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
    3. Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the Borrower included in the forgiveness amount.
  • Documentation showing the average number of FTE employees on payroll per month for the selected time period utilized completing PPP Schedule A. Documents may include payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941) and state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state. Documents submitted may cover periods longer than the specific time period.
  • Documentation verifying existence of the obligations/services prior to February 15, 2020 and eligible payments made during the Covered Period.
  1. Business mortgage interest payments: Copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
  2. Business rent or lease payments: Copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the Covered Period; or lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.
  3. Business utility payments: Copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments.

The application and related instructions answer a number of questions and includes several borrower-favorable changes. However, there are still a number of outstanding issues that need to be addressed. As a result, we anticipate the SBA will continue to issue further regulations and narrative-based guidance to assist borrowers as they complete their applications, similar to previously issued interim final rules and frequently asked questions.

CTBK and cfoSOLUTIONSPlus have created a multi-disciplinary team to assist companies in understanding the provisions of the CARES Act and, in particular, the PPP loan application and application for forgiveness.  If you have questions or would like assistance in compiling the required information and completing the PPP Loan Forgiveness Application, please reach out to our team.

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