SBA Issues New Guidance Clarifying the PPP Loan Forgiveness Process

2 min

On August 4, 2020, the Small Business Administration (SBA) released a new Frequently Asked Questions (FAQs) document that focuses on the Paycheck Protection Program (PPP) loan forgiveness process. The SBA previously released FAQs relating more broadly to the PPP loan program, which it has updated regularly over the last several months. The new FAQs are intended to provide guidance that specifically relates to forgiveness of PPP loans under Section 1106 of the CARES Act, as amended by the Paycheck Protection Program Flexibility Act.

The loan forgiveness FAQs provide additional information regarding:

  • The loan forgiveness application process, including which borrowers may be eligible to use the "EZ" application form;
  • When borrowers are expected to make payments on unforgiven loan amounts and accrued interest (including clarifying that borrowers who submit forgiveness applications within ten months of the applicable Covered Period are not required to make loan payments until the forgiveness amount is remitted to the lender by the SBA. If the loan is fully forgiven, no payments are required.);
  • When paid and incurred payroll and nonpayroll costs may be included in a borrower's forgiveness calculation;
  • What types of payroll expenses are eligible for forgiveness (including questions about commissions and bonuses, group healthcare benefits, and retirement benefits);
  • How the amount of owner compensation may be calculated based on different types of businesses (C-Corporations, S-Corporations, Self-employed Schedule C or Schedule F filers, General Partners, LLC owners);
  • What types of nonpayroll expenses are eligible for forgiveness (including questions about interest on unsecured credit, recently renewed or refinanced leases and mortgages, and utility payments); and
  • How to calculate loan forgiveness reductions for reductions in salary or FTE headcount (including examples and exceptions).

The SBA previously indicated that lenders could begin accepting forgiveness applications on August 10, 2020, and provided guidance on the forgiveness review process. We previously wrote about the forgiveness application and loan forgiveness requirements here and here.