A lot of businesses were quick to take a loan that came out of the CARES Act’s Paycheck Protection Program (PPP), as administered by the Small Business Administration (SBA). But those businesses did not take the funds knowing all the rules (or what the whole process would look like). As many readers of this article are likely aware, the SBA and Treasury Department finally released the PPP loan forgiveness application and instructions on Friday, May 15 – which provided more clarity for PPP borrowers. 

This most recent guidance contains a lot of components to digest. But here are some of the key considerations for, and highlights from, the guidance provided on May 15:

• $2 Million Threshold Representation: Each borrower must confirm whether it, combined with its affiliates (to the extent required under the SBA’s interim final rule on affiliates), received PPP funds over $2 million.
• Payroll Percentage Representation: Each borrower must confirm that at least 75% of the forgiveness amount is for payroll costs.
• Payroll Cost Timing: Each borrower will need to determine whether the “eight weeks” begins after loan disbursement or the first day of the first pay period following loan disbursement.
• Document Retention: Each borrower must maintain certain PPP loan related documentation for at least six years after the loan is forgiven or paid in full. This will likely impact the calculation for many borrowers.
• Headcount Clarification: Forgiveness will not be reduced for FTE headcount reductions that relate to certain events. For example:
  • Employees to whom the borrower made a good faith, written offer to rehire during the Covered Period or the Alternative Payroll Covered Period (as those terms are defined in the guidance and application – above) that was rejected by such employee. This guidance was already provided under the existing FAQ guidance.
  • Employees who during the Covered Period or Alternative Payroll Covered Period were:
    • Fired for cause;
    • Voluntarily resigned; or
    • Voluntarily requested and received a reduction of their hours.

Although this is just a small sample of the key items that have been on the mind of a lot of PPP borrowers, the application instructions do provide guidance on several other topics. 

The Treasury also provided a related press release stating that the SBA will be soon providing even more guidance to borrowers and lenders on the forgiveness process. 

You or your lender will likely have questions about or need assistance with this process. Getting assistance from legal counsel now, could help you avoid much larger issues in the future.