New Answers to PPP Forgiveness Questions Published by SBA

The Small Business Administration (SBA) and Treasury Department published a new Frequently Asked Questions (FAQ) document on August 4, 2020 to address some of the processes and calculations Paycheck Protection Program (PPP) borrowers should use to determine how much of their PPP loan is forgivable. According to the Journal of Accountancy, the PPP has funded nearly $521 billion in forgivable loans to help small businesses and other eligible entities impacted by the COVID-19 pandemic. We are still waiting to see if Congress acts to simplify the PPP forgiveness process for loans below a certain amount. Additionally, Congress is considering various proposals that could create a new PPP loan program for certain companies that are significantly impacted by COVID-19.

We have posted the 10-page FAQ here and highlighted sections most likely to be relevant to our clients and friends of the firm. These include:

  • Sole proprietors, independent contractors, and self-employed individuals with no employees when they applied for the PPP loan which did not include employee salaries in the computation of average monthly payroll should use the EZ PPP Loan Forgiveness Application (Form 3508EZ).
  • Borrowers who submit a loan forgiveness application within 10 months of the end of their covered period are not required to make any loan payments until the forgiven amount is remitted to the lender by the SBA. If only a portion of the loan is forgiven, the lender is responsible for notifying the borrower of the amount still due and when the first payment is due. The borrower is only responsible for paying interest on the portion of the loan not forgiven.
  • Payroll costs incurred during the covered or alternative covered period but paid after the period ends are eligible for loan forgiveness. Payroll costs incurred before the beginning of the covered/alternative covered period and paid during the period are also eligible for loan forgiveness. Likewise, non-payroll costs incurred during the covered period and paid after the period ends or incurred before the beginning of the covered period and paid during the period are also eligible for loan forgiveness.
  • If a borrower’s payroll cycle is twice per month or less frequently (for example monthly), the borrower will need to calculate payroll costs for partial pay periods for loan forgiveness purposes.
  • Borrowers should calculate cash compensation based on gross, not net, payments.
  • Employer-paid expenses for group healthcare benefits paid for or incurred during the covered/alternative covered period qualify for loan forgiveness. Healthcare benefits cannot be accelerated from outside of the covered/alternative covered period. No portion of healthcare costs paid by employees is eligible for loan forgiveness.
  • Employer contributions for employee retirement benefits that are paid for or incurred during the covered/alternative covered period qualify as payroll costs eligible for loan forgiveness. Retirement benefits cannot be accelerated from outside of the covered/alternative covered period.
  • The amount of owner compensation eligible for forgiveness depends on the type of business taxable entity and the length of the covered period. The maximum amount is $20,833 per individual across all businesses in which there is an ownership stake, unless an eight-week covered period is used, and then the maximum is $15,385. C Corporations, S Corporations, and entities taxed as partnerships all have different calculation for the limitation based on 2019 income.
  • Interest payments on unsecured debt is not eligible for loan forgiveness even though it is a permissible use of PPP loan proceeds.
  • Lease payments are eligible for forgiveness if they are for a renewal of an existing lease that expired on or after Feb. 15, 2020.
  • Forgiveness-eligible transportation utility costs are transportation utility fees assessed by local or state governments. 
  • Borrowers seeking loan forgiveness should maintain employee-related documentation including written offers to rehire, written rejection of rehire offers, and written records of efforts to hire a similarly qualified individual if they want to exclude those terminated employees in the reduction in FTE employees.
  • Calculations for the FTE Reduction Exceptions should include all employees, including those who earned more than $100,000 in 2019 (even though they are not listed in Table 1 off the Schedule A worksheet of the Loan Forgiveness Application).
  • When calculating a reduction in forgiveness amount due to a reduction in employee salary or hourly wage of 25% or more, a reduction in hours worked is not included in the salary wage reduction calculation, only a reduction in the employee’s wage rate. The reduction in hours only impacts the FTE calculation during the covered period. 
  • For purposes of calculating the salary/wage reductions in excess of 25% for certain employees, only salaries and wages are taken into account and not other forms of compensation (for example tips, commissions, bonuses and hazard pay).


Contact WBL today to discuss your questions about the latest guidance on PPP Loans and forgiveness. Check out WBL’s COVID-19 Business Support page for links to loan forgiveness applications and application instructions, blog articles, presentations and more resources to help your business during these uncertain times.

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