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SBA Releases Long-Awaited PPP Forgiveness Application and Instructions

On May 15, the SBA and Treasury released the long-awaited PPP loan forgiveness application and related guidance, providing much-needed clarity and ending weeks of speculation about how borrowers will obtain loan forgiveness. The application and instructions confirm that if a borrower used at least 75% of the loan proceeds on eligible payroll costs, no more than 25% on eligible non-payroll costs, and maintained staffing and salary levels, the PPP loan may be forgiven in full. The application further confirms the forgiveness amount will be reduced correspondingly by a failure to follow these requirements.

The application and instructions provide step-by-step directions for borrowers to calculate their eligible forgiveness amounts. Additionally, they provide new guidance and points of clarification, including:

  • Borrowers may now elect to utilize the “Covered Period” or an “Alternative Payroll Covered Period” to determine the eight-week period during which loan proceeds must be spent in order to qualify for forgiveness. Borrowers who use a biweekly payroll schedule, or a more frequent schedule, may choose to have the eight-week period begin on the first day of its first pay period following loan disbursement, rather than on the date of disbursement.

  • Payroll costs that are incurred, but not yet paid, during the eight-week period (capped at $15,385 per employee reflecting the PPP’s $100,000 annual salary limitation) will be eligible for forgiveness if paid on or before the next regular payroll date.

  • Compensation paid to owners, such as owner-employees, self-employed individuals, or general partners, are separately categorized and calculated (also capped at $15,385 per individual), but are included in payroll costs for forgiveness purposes.

  • There is no penalty for a reduction in staffing or salary for an employee if the borrower made a good-faith, written offer to rehire the employee during the eight-week period, or if the employee was fired for cause, voluntarily resigned, or voluntarily requested a reduction of hours.

  • Borrowers are required to maintain all documentation related to the PPP loan for six years after the loan is forgiven or repaid in full and allow the SBA or Office of Inspector General to access such files upon request.

As expected, the forgiveness application requires the borrower to indicate whether it received a loan in excess of $2 million (when aggregated with any affiliates). This corresponds with the SBA’s prior announcement that it would audit loans over $2 million to ensure that the borrower properly certified in good faith that, given current economic conditions, the loan was necessary to support ongoing operations.

The application further specifies documentation that is required to be submitted and/or maintained to substantiate the borrower’s payroll costs, staffing and salary, and non-payroll costs, such as mortgage interest payments, rent or lease payments, and utility payments.  

According to the press release announcing the forgiveness application, the SBA will release additional “regulations and guidance to further assist borrowers as they complete their applications, and to provide lenders with guidance on their responsibilities.”

© 2022 Bracewell LLPNational Law Review, Volume X, Number 139

About this Author

Rachel goldman, complex commercial litigation, attorney, Bracewell law

Rachel Goldman is an experienced litigator in both federal and state courts, at the trial and appellate levels. Her practice focuses on complex commercial matters, including claims for breach of contract, post-acquisition disputes, class actions, False Claims Act cases, insurance coverage disputes, contested bankruptcy matters, challenges under the Commerce Clause and the Supremacy Clause, government regulation, securities litigation, construction law, First Amendment and libel actions. Additionally, Rachel's tenure as in-house counsel provides a valuable perspective of...

David Shargel, commercial litigation, white collar criminal defense attorney, Bracewell Law firm

David Shargel is a senior counsel in the trial section of Bracewell's New York office. His litigation practice focuses general commercial litigation, internal investigations and white collar criminal defense. Mr. Shargel's practice also involves issues surrounding electronic discovery and data management.

Mr. Shargel has litigated complex commercial disputes involving contract, business torts, insurance coverage, technology and fraud, and has litigated disputes concerning federal and state constitutional law, including the Commerce and Due...

David Ball, Intellectual Property Attorney, Bracewell Giuliani, law firm

David J. Ball is a partner in Bracewell's litigation practice. David has experience in the areas of intellectual property litigation (patent, copyright, trademark, trade dress, and IP theft), bankruptcy litigation, and state and federal appeals.  He also regularly represents financial services firms (international banks, regional banks, hedge funds, etc.) in complex commercial disputes.  David routinely draws on his litigation experience to counsel clients in all manner of business transactions, including risk analysis, contract formation, mergers and acquisitions, and...

Thomas Kokalas, White Collar Defense, Attorney, Bracewell, law firm

Thomas Kokalas is a partner in Bracewell's New York office, where he is a member of the firm's White Collar Defense, Internal Investigations and Regulatory Enforcement practice group. He represents corporations and individual clients in federal and state white collar criminal and regulatory cases, internal investigations and compliance reviews.

Mr. Kokalas has represented individuals and corporations in investigations and prosecutions by the Department of Justice, the SEC, the Manhattan District Attorney's Office and the New York State Attorney...

Joseph T. Lasher Complex Commercial Litigation Attorney Bracewell New York, NY

Joseph Lasher focuses his practice on complex commercial litigation matters and contractual disputes. He advises clients through all phases of the litigation process, including motion practice, trial, and settlement.

Joseph previously served as judicial intern to the Honorable Nanette Laughrey of the U.S. District Court for the Western District of Missouri. He also worked at the Duke Health Justice Clinic as a certified law student, representing clients in disability cases.