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SBA Releases Loan Forgiveness Application And Instructions, Plus Rule For Foreign Affiliates


The new SBA Loan Forgiveness Application and Instructions provide clarity on certain aspects of PPP loan forgiveness determination and the process

Helpful guidance and the definition of some key terms are provided

A new SBA interim final rule provides safe harbor for certain loan applicants who did not include employees of foreign affiliates in eligibility determination 

The Small Business Administration (SBA) recently released the Paycheck Protection Program (PPP) Loan Forgiveness Application and instructions that provide much-needed insight for PPP borrowers and lenders.

The SBA also issued an additional interim final rule to address uncertainty concerning the treatment of foreign affiliates created by previous SBA guidance.

SBA Loan Forgiveness Application and Instructions

The long-awaited Loan Forgiveness Application and instructions provide borrowers and lenders the first substantive guidance on the issue of PPP loan forgiveness. Notable concepts and clarifications in the application and instructions include:

  • Borrowers may elect to apply an alternative payroll covered period, which allows the borrower to begin calculating the eight-week covered period on the first day of their first pay period following its PPP Loan Disbursement Date.

  • Guidance on how to calculate payroll costs, introducing “costs incurred” and “costs paid” concepts and a broader term of “cash compensation” that counts toward the $100,000 annual salary limitation toward forgiveness.

  • Information related to the calculation of full time equivalent (FTE) employees, including the treatment of any employee who works under 40 hours per week and a simplified alternative calculation.

  • Confirming the June 30, 2020, deadline to restore FTE headcounts, even if that date is outside of the borrower’s eight-week forgiveness period. Note, that the forgiveness application does not allow for a comparable exemption for any previously decreased wages that are restored by June 30, as contemplated in the CARES Act.  

  • Methodology for calculating the impact that any decrease of the average salary or hourly wage of employees may have on a borrower’s forgiveness amount.

  • Mortgage interest related to certain real and personal property mortgage obligations are included in covered “business mortgage interest payments.”

  • Covered “business rent or lease payments” include certain payments pursuant to certain leases of real and personal property.

  • “Business utility payments” include payments for a service for the distribution of electricity, gas, water, transportation, telephone or internet access for which service began before February 15, 2020. 

  • An acknowledgement by borrowers that the SBA may request additional information for the purposes of evaluating borrower’s eligibility for the PPP loan and subsequent loan forgiveness. Failing to provide such information may result in a determination that the borrower was ineligible or a denial of loan forgiveness.

  • A requirement to indicate on the application whether the borrower, together with its affiliates, received PPP loans with an original principal amount in excess of $2 million.

Each borrower’s loan forgiveness application process and determination will be unique, taking into account the borrower’s distinctive circumstances and analyzing the PPP rules to maximize related loan forgiveness.  

Safe Harbor for Applicants Who Did Not Include Non-U.S. Employees 

The SBA acknowledged that its own prior guidance created confusion and ambiguity. As such, it posted an interim final rule on May 18, that further clarified that an entity must include all employees of its domestic and foreign affiliates, except in those limited circumstances where the affiliation rules expressly do not apply to the entity and any entity that, together with its domestic and foreign affiliates, has more than 500 employees, or does not otherwise meet an applicable PPP size standard, is ineligible for a PPP loan.  

Any small business that applied for a PPP loan prior to May 5, 2020, will not be found to be ineligible for a PPP loan based on the applicant’s exclusion of non-U.S. employees from the applicant’s total employee headcount as long as the applicant, together with its affiliates, had no more than 500 employees whose principal place of residence in the United States. Any such applicant will also not be deemed to have made an inaccurate certification of eligibility solely on that basis, but still may not use PPP funds to support non-U.S. workers or operations.

© 2020 BARNES & THORNBURG LLPNational Law Review, Volume X, Number 140


About this Author

Mary E. Comazzi Aviation and Unmanned Aerial Vehicles & Corporate Attorney Barnes & Thornburg Southfield, MI
Of Counsel

Mary Comazzi learned precisely what direction she wanted for her career by taking the right steps on the right course at the right time, and she strives to do the same for her clients. Mary’s general commercial and aviation clients appreciate her honesty, practicality and responsiveness in assessing their issues and helping address problems they are facing, in the air or on the ground.

Mary helps clients craft, negotiate and document mergers, acquisitions, reorganizations, joint ventures, and other complex commercial transactions. She also has extensive experience structuring...

Jason B. Myers Finance & Real Estate Attorney Barnes & Thornburg Dallas, TX

Jason is a commercial attorney skilled in the areas of finance and real estate. Clients often turn to Jason for their most unique transactions requiring a combination of high-level legal skills and outside-the-box creativity.

For example, he served as the primary draftsman on behalf of a municipal client of the stadium lease for an NFL team; advised on the development, financing and leasing of a shopping center in Sarajevo, Bosnia-Herzegovina; and managed all real estate-related aspects of the acquisition of a crude oil refinery and the related acquisition and sale-leaseback of 166 convenience stores.*

Before joining Barnes & Thornburg, Jason served as senior counsel and director of Hudson Advisors L.P., a globally integrated asset manager operating in the private equity space focused on real estate, credit, equity and other financial assets. He was head of its financial services legal team and provided coverage for the internal business groups handling credit facilities and derivatives transactions and related regulatory matters.

In addition, Jason's experience in private practice includes traditional real estate and finance transactions, as well as similar projects in the energy, public-private partnership, and M&A sectors, including representing an institutional lender in the organization and material modification of commercial real estate loans totaling in excess of $1.5 billion.

Before practicing law, Jason served as vice president of asset management for a real estate developer and independent power producer with responsibilities that included financial modeling, regulatory and covenant compliance, and investor relations.

*These matters occurred prior to joining Barnes & Thornburg.



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Erika Weiss, Barnes Thornburg Law Firm, Grand Rapids, Tribal Law and Litigation Attorney

Erika Weiss is an associate in Barnes & Thornburg’s Grand Rapids office and a member of the Litigation Department. Ms. Weiss provides organizational and strategic guidance to the firm’s litigation clients. She has experience in commercial litigation, business law, securities litigation and American Indian tribal law.

Prior to joining Barnes & Thornburg, Ms. Weiss worked for a firm representing tribal governments and tribal entities. She provided general counsel legal services to tribally owned businesses and assisted tribes in...

Jeremy Reidy Mergers & Acquisitions Attorney Barnes Thornburg Law Firm Fort Wayne, Indiana

Jeremy Reidy counsels businesses in mergers, acquisitions and other corporate law matters. Jeremy embraces a legal project management framework designed to better enable the firm and his clients to plan, manage, facilitate and effectuate transactions. He remains committed to going beyond the closing of the business transaction and provide guidance regarding the integration and other transition issues.

Jeremy works with business owners on M&A transactions and other corporate and commercial matters with a focus on outlining clear communication channels for more effective...

Jenni Tauzel Private Equity Attorney, Barnes Thornburg Law Firm Dallas

Through over a decade of practice, Jenni Tauzel has focused on leveraging her background in finance and accounting to the benefit of her clients. She represents public and private entities, primarily in the energy and professional services industries, with virtually all matters of capital raising, debt financing, commercial transactions, mergers and acquisitions, outsourcing, and restructuring.

Jenni represents multiple investor groups, private equity founders, issuers, REITs, and a range of professionals with organization, formation, capitalization and reorganization issues.