SBA Publishes Loan Forgiveness Application for Paycheck Protection Program

COVID-19 Update

On May 15, 2020, the Small Business Administration (SBA) published a form of the loan forgiveness application for borrowers of Paycheck Protection Program (PPP) loans under the CARES Act. The application provides instructions for calculating loan forgiveness under the PPP and provides guidance for borrowers seeking to take advantage of the PPP’s forgiveness rules.

Components of the Application

The application has three components: (1) the PPP Loan Forgiveness Calculation Form, (2) the PPP Schedule A Worksheet, and (3) the optional PPP Borrower Demographic Information Form.

The borrower is required to make certain representations and certifications, including certifications that the dollar amount for which forgiveness is requested (1) was used to pay costs that are eligible for forgiveness; (2) includes all applicable reductions due to decreases in the number of full-time-equivalent (FTE) employees and salary/hourly wage reductions; (3) does not include nonpayroll costs in excess of 25% of the amount requested; and (4) does not exceed eight weeks of 2019 compensation for any owner-employee or self-employed individual/general partner, capped at $15,385 per individual.

Notable New Guidance From the SBA

The application provides some new clarity as to the forgiveness calculation and its components.

Alternative Payroll Covered Period

Generally the “Covered Period” used to calculate amounts eligible for forgiveness is defined as the eight-week (56-day) period beginning on the first day the borrower receives its PPP loan proceeds. The application also defines “Alternative Payroll Covered Period,” which may be used by borrowers with a biweekly (or more frequent) payroll schedule. These borrowers may elect to calculate eligible payroll costs using the eight-week period that begins on their first pay period following their PPP loan disbursement date.

Average Full-Time Equivalency

For purposes of calculating any reductions in forgiveness due to reductions in the average number of a borrower’s FTE employees, the application explains that to calculate the average full-time equivalency for an employee (where a full-time employee would equal 1.0), a borrower must enter the number of hours for which the employee is paid per week and divide by 40. Alternatively, a borrower may elect a simplified calculation method to calculate full-time equivalency, which allows a borrower to simply assign a 1.0 for each employee who works 40 hours or more per week and a 0.5 for employees who work less than 40 hours per week.

FTE Reduction Safe Harbor and Exceptions

Notably, the application introduces a safe harbor, which exempts certain borrowers from loan forgiveness reduction based on FTE employee levels. A borrower is exempt from these reductions when (1) the borrower reduced its FTE employee levels in the period beginning February 15, 2020, and ending April 26, 2020; and (2) the borrower then restored its FTE employee levels by no later than June 30, 2020, to the level it was during the borrower’s pay period that included February 15, 2020.

In addition, borrowers will not be penalized for FTE reductions resulting from persons who were terminated for cause, voluntarily resigned, or voluntarily requested and received a reduction of hours, or from persons who were furloughed and then refused the employer’s offer, made in good faith and in writing, to return to their job.

Submission Requirements

The PPP Loan Forgiveness Calculation Form and the PPP Schedule A Worksheet must be submitted to a lender along with the required documentation. The application form lays out the different types of documentation that must be submitted for calculations of payroll costs, FTE employees and nonpayroll expenses.

Manatt will continue to monitor developments in the SBA Paycheck Protection Program and in other COVID-19 relief programs. Our COVID-19 resources are available at



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