Alert: "SBA Releases PPP Loan Forgiveness Application"

On Friday, May 15, 2020, the Small Business Administration (SBA) published the “Paycheck Protection Program (PPP) Loan Forgiveness Application” to be completed by borrowers to have their PPP loan forgiven.

The Form itself and supporting documentation described in Appendix A to the Form must be submitted to the borrower’s lender.  Appendix A to the form describes both the supporting documentation that the borrower must obtain and submit to its lender along with its PPP forgiveness application, and other documentation that the borrower must obtain and retain in its files but not submit to its lender.  The form also states that the SBA may instruct the lender to disapprove the PPP loan forgiveness if the SBA determines that the borrower was ineligible for the PPP loan.

The instructions to the Form include an important clarification regarding the situation where an employee pay period straddles the end of the borrower’s 8-week (56 day) “covered period” for paying forgivable “payroll costs.”  The instructions to the Form state that payroll costs that are “incurred,” but not paid, during the covered period, are nevertheless eligible for forgiveness if paid on or before the next regular payroll date after the end of the covered period. Payroll costs are considered to be “incurred” on the day that the employee’s pay is earned.  Payroll costs are considered “paid” on the day that paychecks are distributed or the borrower originates an ACH credit transaction.  A similar clarification was issued regarding non-payroll costs where the billing period for the non-payroll cost (rent, utilities and mortgage interest) straddles the end of the borrower’s “covered period.”

Finally, the SBA imposed an important document retention obligation with respect to all documents relating to the borrower’s PPP loan and its forgiveness, including documents supporting the borrower’s certification in its PPP loan application as to the “necessity” of the PPP loan.  The retention period is for six years after the PPP loan is forgiven or paid in full.  Additionally, the borrower must permit representatives of the SBA, including the SBA’s Office of Inspector General, to review the retained documents.