PPP Loan Forgiveness Information and Application Process · PPP Loan Forgiveness Washington Small Business Development Center ... The information provided in this presentation is

PPP Loan Forgiveness Information and Application Process

PPP Loan Forgiveness

Washington Small Business Development Center

Today we’ll cover:• PPP Basic Application Information• The PPP Loan Forgiveness Application Required Docs• Documents Required to be Maintained but not Submitted• Payroll Use, Costs & Forgiveness Calculations • Impact of the EIDL Loan on the PPP • Completing The Loan Forgiveness Application • Worksheet A – Used to Complete Schedule A • FTE (Full-Time Equivalent) Calculation Criteria • Self Employed Individuals/Sole Proprietors• Representations, Certifications, Audits, Appeals

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The information provided in this presentation is relevant as of 5-28-20. Neither the presenter not the Washington Small Business Development Centers are the final authority on this material. The information is subject to change at any time with new legislation and/or additional rules from the Treasury or the SBA.

The PPP Loan Forgiveness Application Requirements:The PPP Loan Forgiveness document is 11 pages and includes numerous details and math calculations but only three documents/pages are required to be submitted:1. Primary Application and Loan Forgiveness Calculation Form2. PPP Schedule A3. Loan Forgiveness Application Representations & Certifications

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Documents Required to be Maintained but notSubmitted are:1. PPP Schedule A Worksheet with documentation of each

employee including salary/wage reductions Table 1 & Table 2, documentation of rehire refusals, firings, resignations, reductions in work hours

2. All records relating to the loan including the loan application, certifications for the loan request, and the borrower's compliance with loan requirements

3. Documents must be retained for six years after loan forgiveness or the loan is paid in full and permit inspection of the documents on request

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PPP Basic Application Information–Starting at the Top:

• Business EIN, PPP Loan Number & Lender PPP Loan Number

• PPP Loan Amount• PPP Loan Disbursement Date• Employees at time of application• Employees at time of request for forgiveness• Do not check the $2 Million Box unless you received a

PPP for that amount or more



Payroll Use, Costs & Forgiveness Calculations – Schedules & Covered Period:• Describe/Select your regular Payroll Schedule to show when payroll

costs are incurred (accrued) or paid (cash). Paid is the day checks or ACH transactions are originated. Incurred is the day costs are earned

• Covered Period is the 8-week period following funding of the PPP. • NEW – Some costs incurred before the 8 weeks and paid during the 8

weeks and some costs incurred during the 8 weeks and paid afterwards can qualify for forgiveness

• NEW - Alternate Payroll Covered Period – May allow the 8 weeks to start on the first day of the normal pay period rather than on disbursement of the funds (for payroll only)

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Impact of the EIDL Loan on the PPP for Borrowers who receive both loans:• Economic Injury Disaster Loan (EIDL) Advance – Reduces the PPP Loan

Forgiveness by the Amount of the EIDL Advance• EIDL Application Number on the PPP Application – Used to check if

PPP recipient received an EIDL loan. If they did and it was used for payroll, the EIDL should have been refinanced into the PPP BUT

• More guidance is needed on EIDL vs. PPP timing. More PPP Loans have been processed than EIDL loans. They cannot be used for the same purposes, but we do not know how that will be resolved for EIDL loans funded after PPP loans are funded and or the 8 week PPP loan forgiveness period is over

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Completing The Loan Forgiveness Application:• The application requires the borrower to start with the Worksheet to

Schedule A, then completion of Schedule A, then completion of the Loan Forgiveness Application Form

• The Worksheet to Schedule A : 1) computes eligible compensation for each employee – including any who had their salaries reduced, 2) caps compensation at $100K, 3) determines the FTE for the Covered Period or Alternate Covered Period, 4) Uses FTE to determine any reduction in loan forgiveness

• Tables 1 & 2 in the Worksheet A determine the salaries/wages paid to each employee during the 8-week period as compared to the 2019 annualized rate

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Worksheet A–Used to Complete Sched A-Payroll Detail:• Included in payroll costs are salary, wages, commission, cash tips,

vacation pay, hazard pay and parental, family, medical or sick leave & severance pay

• Excluded are salaries in excess of $100K, employees outside the US, Sick or family leave under the Families First Act

• Also Excluded for this worksheet are: 1) independent contractors–these are not eligible as employees, Owner employees, Self Employed & partners - these add their information directly to Schedule A

• Using 75% of the PPP Loan amount on qualified payroll during the 8-week period establishes that element for full forgiveness. This is called Safe Harbor for Payroll

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FTE (Full-Time Equivalent) Calculation Criteria:• Average FTE Calculation of the 8-week period – two methods:

• 1) Add the total employee hours and divide by 40

• 2) Calculate every employee who worked 40 hours per week or more at as 1.0, Use 0.5 for all employees who worked less that 40 hours per week. Add it up to determine FTE

• A similar calculation will be made to determine the historical FTE average the PPP loan was based on. The reference period are either Feb 15, 2019 to June 30, 2019 or Jan 1, 2020 to February 29, 2020 or for seasonal employers, May 1, 2019 to Sept 15, 2019

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FTE (Full-Time Equivalent) Calculation Criteria:• If the historical FTE matches the 8-week FTE there is no reduction in

the forgiveness for FTE. This is called FTE Safe Harbor• If there is not a match, the loan forgiveness is reduced accordingly.• To get full loan forgiveness, 75% of the loan amount is used for

qualified payroll and 25% is used for qualified rent, utilities and mortgage interest.

• NEW – If employer can show written offer to rehire an employee (during the 8-week period) but it was rejected that reduction in FTE will not result in a reduction in forgiveness

• The same is true if an employee was fired for cause, voluntarily resigned, or wanted a reduction in hours

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Self Employed Individuals/Sole Proprietors, Owners getting W-2 wages and Entity Partners – Lender Response to Loan Forgiveness Application:

• Self Employed - Forgiveness is related to payroll costs at 8/52 of line 31 of the individual’s 2019 Schedule C

• Amounts paid to Self Employed, Owners on W-2 wages, and General Partners are capped at $15,385 each person

• Amounts paid to these individuals during the 8-week covered period or alternate covered period, are totaled and added to Line #9 of Schedule A

• For ALL PPP loan forgiveness applications – The lender must respond to the borrower with a decision within 60 days

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Representation, Certifications, Audits, Appeals:• The loan forgiveness application requires a representations and

certification page with signature to be submitted – The borrower must certify that they know and understand the rules of the PPP including eligibility, use of proceeds, loan forgiveness amounts

• The SBA may review PPP loans and Loan Forgiveness Applications as it deems appropriate and at any time

• Lenders are required to confirm the calculations on the loan forgiveness application

• PPP loan reviews will require the lender to ask the PPP borrower to respond any questions and the SBA will consider all information provided by the borrower in it review

• The SBA has established rules and timelines for appeals for any PPP borrower who is determined ineligible for the PPP or loan forgiveness by either the borrower or the SBA

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PPP Loan Forgiveness Questions & Unknowns:• It is not clear what the EIDL impact on PPP will be for EIDL loans not processed

before the PPP is issued or the EIDL was not refinanced in the PPP.• Congress may consider changes to the 8-week time frame but as of May 20 it is

still 8-weeks. Will additional flexibility be added to choose when your 8 weeks starts?

• Date (or final date) to apply for loan forgiveness with the lender is not clear.• Definition/Limits of “Any Pay Period” for historical Cash & FTE calculation is not

clear.• Payments to self employed, owners getting W-2 wages and Entity partners are

included and allowed for forgiveness but Guidance on qualifying amounts is missing.

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Find the Nearest Advisor:https://wsbdc.org/contact-an-advisor/

[email protected]

https://wsbdc.org/contact-an-advisor/

Paycheck Protection Program

Loan Forgiveness Application Examples

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Covered Period vs. Alternate Covered Period• Covered Period: the eight-week (56-day) Covered Period of your PPP loan.

The first day of the Covered Period must be the same as the PPP Loan Disbursement Date. • For example: if you received your PPP loan proceeds on Monday, April 20, the

first day of the Covered Period is April 20 and the last day of the Covered Period is Sunday, June 14.

• Alternative Payroll Covered Period: For administrative convenience, Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate 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.• For example: if you received your PPP loan proceeds on Monday, April 20, and the

first day of your first pay period following your PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20.

• Borrowers who elect to use the Alternative Payroll Covered Period must apply the Alternative Payroll Covered Period wherever there is a reference in this application to “the Covered Period or the Alternative Payroll Covered Period.” However, Borrowers must apply the Covered Period (not the Alternative Payroll Covered Period)wherever there is a reference in this application to “the Covered Period” only.

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Example 1 – Corporation/LLC

• Assumptions for ABC Inc • Owner-Employee earns $6,000• Maintained 2 FTE employees after Order• Laid off 3 FTE employees after Order• Rehired 3 FTE employees after receiving the PPP Loan• Paid $5,000 for employee health insurance during covered period • Paid $3,000 for state and local taxes during covered period

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PPP Loan Forgiveness Calculation

Form

Page 3

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PPP Loan Forgiveness Calculation Form - Page 3

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Covered Period

OR

Alternate Covered Period

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Form

Page 4

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Form

Page 6

(PPP Schedule A)

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PPP Loan Forgiveness Calculation Form - Page 6(PPP Schedule A) Lines 1 – 8

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PPP Loan Forgiveness Calculation Form - Page 6(PPP Schedule A) Lines 9-13

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Form

Page 7

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PPP Loan Forgiveness Calculation Form - Page 7Steps 1 - 3

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Example is for John Doe, but you do one of these for each employee in Table 1 on Page 9


Form

Page 9

(PPP Schedule A Worksheet)

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PPP Loan Forgiveness Calculation Form - Page 9(PPP Schedule A Worksheet) Table 1 & 2

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PPP Loan Forgiveness Calculation Form - Page 9(PPP Schedule A Worksheet) Steps 1 - 5

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Example 2 – Sole Proprietorship

• Assumptions for John Smith dba Smith’s Technical Support• Owner takes draw of $2,500 during covered period • Maintained 0 FTE employees after Order• Laid off 1 FTE employee after Order• Rehired 1 FTE employee after receiving the PPP Loan• Paid $0 for employee health insurance during covered period • Paid $350 for state and local taxes during covered period

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Covered Period

OR

Alternate Covered Period

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Form

Page 4

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PPP Loan Forgiveness Calculation Form - Page 6(PPP Schedule A) Lines 1 – 8

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PPP Loan Forgiveness Calculation Form - Page 6(PPP Schedule A) Lines 9-13

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PPP Loan Forgiveness Calculation Form - Page 9(PPP Schedule A Worksheet) Table 1 & 2

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PPP Loan Forgiveness Calculation Form - Page 9(PPP Schedule A Worksheet) Steps 1 - 5

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Questions

U.S. Small Business AdministrationSeattle District Office

206.553.7310

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Q&A

Mark Costello

Deputy District Director U.S. Small Business Administration Seattle District Office

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Steve Burke

Western Washington Regional Manager Small Business Development Center

Janie Sacco

Marketing & Outreach Specialist U.S. Small Business Administration Seattle District Office