On May 15th, the SBA released the application borrowers under the Paycheck Protection Program (“PPP”) must use to calculate the amount that may be forgiven by the lender. According to SBA regulations, the SBA will allow lenders to rely on certifications of the borrower in order to determine eligibility of the borrower and use of loan proceeds.
Loan Forgiveness Application
This 11-page application contains three important forms. The following is a very high-level overview of the forms. Please carefully read and follow the instructions for each form. Should the instructions conflict with this blog, the instructions in the form control.
1. PPP Loan Forgiveness Application
The first is the Paycheck Protection Program Loan Forgiveness Application. This form is fairly straight forward, but it is important to note, only the expenses paid within the 8-week period after receiving the load are eligible for forgiveness. There is some flexibility, but generally speaking, the 8-week period begins on the date you receive the funds.
2. PPP Schedule A Worksheet
The second schedule in the packet is the PPP Schedule A, however, you will need to complete the PPP Schedule A Worksheet before you are able to complete the PPP Schedule A. The PPP Schedule A Worksheet requires a list of employees who were employed at any time during the covered period. The schedule divides employees who received compensation at an annualized rate of more or less than $100,000.00. The schedule will then help you determine if you qualify for a safe harbor exempting certain borrowers from certain forgiveness reductions.
3. PPP Schedule A
Next, the calculations from PPP Schedule A Worksheet will need to be moved to PPP Schedule A. This schedule will also require you to provide certain other costs and compensation to owners.
Submitting Application and Retaining Documents
Finally, you must submit: (1) the Paycheck Protection Program Loan Forgiveness Application; and (2) the PPP Schedule A to your lender. Although you do not need to submit the PPP Schedule A Worksheet, you must retain a copy of it along with the supporting documentation and all other documents related to the loan or its forgiveness for six years after the loan is forgiven or paid in full.
Additional Issues That May Prevent Forgiveness
The SBA may direct a lender to disapprove a borrower’s application if it is determined that the borrower was ineligible for the PPP loan. Therefore, you will be disqualified if your company does not meet the requirements as outlined in our prior blog post.
Further, you may be disqualified if any of the following apply:
- You are engaged in any illegal activity;
- You are a household employer, such as employing nannies or housekeepers;
- An owner with 20% of more of the equity of the company is incarcerated, on probation, on parole, presently subject to indictment, criminal information, arraignment, other criminal charges, or has been convicted of a felony in the last five years; or
- You or a controlled business is currently delinquent or has defaulted on an SBA loan in the past seven years.
For more information about loan forgiveness or for assistance with the form, please contact us at (619) 696-0520.