May. 18th, 2020

SBA Releases PPP Loan Forgiveness Application

This past Friday evening, the SBA released the form that will be used to apply for PPP loan forgiveness. You will eventually submit this form to your lender, along with documentation, to apply for forgiveness. Procedures at each lender will vary, and some may have an electronic process. I have attached the form for your information.

The release of the form and instructions have answered some questions – however, questions still remain. It is anticipated that the SBA will be releasing further guidance regarding forgiveness provisions.

Here are some items from the released form and instructions that I want to bring to your attention:

Start date of the 8-week period:

The default 8-week period start date is the day that the PPP funds were received. For example, if the you received the PPP loan proceeds on Monday, April 20, the first day of the 8-week period is April 20 and the last day of the Covered Period is Sunday, June 14.

However, there is an alternative 8-week period that can be used – for calculation of eligible payroll costs only. If payroll is biweekly (or more frequent) you can elect to use an 8-week period that begins on the first day of the first pay period following the date the PPP funds were received. For example, if you received the PPP loan proceeds on Monday, April 20, and the first day of the first pay period following the PPP loan disbursement is Sunday, April 26, the first day of the alternative 8-week period is April 26 and the last day of the alternative 8-week period is Saturday, June 20.

There was a lot of pressure on the SBA to allow the 8-week period to start once “stay-at-home” orders were lifted. Unfortunately, this was not one of the options in the instructions that were released.

Owner compensation:

Owner compensation, just like compensation of all employees, is capped at an annualized salary of $100,000. This ends up being a cap of $15,385 during the 8-week period. However, if an owner had an annual salary of less than $100,000 during 2019, but increased their wages during the 8-week window, the forgiveness will be based on the lower 2019 compensation.

Flexibility on timing of payroll costs:

The SBA is allowing payroll costs that were incurred during the 8-week period, but not paid during the 8-week period, to qualify if the wages are paid by the next regular payroll date. This means you do not need to accelerate the last payroll into the 8-week period to have it eligible for forgiveness.

Also, while not explicit in the instructions, it appears that payroll costs that were incurred before the 8-week window, but paid during the 8-week period, will be eligible for forgiveness.

For the sake of clarity, the instructions also define “paid” and “incurred.”

Paid: payroll costs are considered paid on the day that paychecks are distributed or the business originates an ACH credit transaction.

Incurred: payroll costs are considered incurred on the day that the employee’s pay is earned.

Flexibility on timing of nonpayroll costs:

Eligible nonpayroll costs (covered interest, covered rent, covered utilities) can be either paid during the default 8-week window or incurred during the default 8-week window and paid by the next regular billing date, even if the billing date is after the default 8-week window.

Calculation of Full-Time Equivalents (FTE’s):

The SBA is providing two options to calculate FTE’s:

1.  Divide the average number of hours worked per week by 40, then round to nearest tenth. Max for each employee is 1.


2.  Assign a 1.0 for employees who work 40 hours or more per week and 0.5 for employees who work fewer hours.

Both calculations should be performed to determine which calculation results in the most loan forgiveness.

Exceptions to reduction in FTE’s:

If there was a reduction in FTE’s, the SBA will disregard reductions due to the following, if the position was not filled by a new employee:

  • any positions for which the business made a good-faith, written offer to rehire an employee during the 8-week period, which was rejected by the employee; and
  • any employees who during the 8-week period
    • were fired for cause,
    • voluntarily resigned, or
    • voluntarily requested and received a reduction of their hours.

Documentation and Retention:

On page 10 of the instructions, there is a list of documentation that must be submitted with the application for forgiveness, as well as documentation that is not submitted, but must be maintained. All of the documentation must be retained for six years after the date the loan is forgiven, or repaid in full.

Click here for the application:Form 3508 Paycheck Protection Program Loan Forgiveness Application

Contact Us:

If you have any questions, don’t hesitate to reach out to our team at Hungerford Nichols CPAs + Advisors.

Phone: (616) 949-3200
COVID-19 Business Resource site: Hungerford Nichols COVID-19 Resource Center