Applying for PPP Forgiveness As Of May 26 2020
Summary
A slide presentation, Applying for PPP Forgiveness As Of May 26 2020, based on Form 3508, released 5/20, and on IFR 136 for borrowers, issued May 22 2020. Its agenda covers an overview of the PPP forgiveness application process and SBA Form 3508, costs eligible for forgiveness, documents required, the forgiveness application with its worksheet and Schedule A, and updates from IFR 136. The slides state that the presentation will not go over detailed calculations, review every line of every form or give specific advice for a business.
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Applying for PPP
Forgiveness
As Of May 26 2020
Based on Form 3508 (released 5/20)
And IFR 136/Borrower (5/22)
Agenda
1. Overview to the PPP Forgiveness Process Application
• SBA Form 3508
2. Costs Eligible for Forgiveness
3. Documents Required
4. Forgiveness Application (with worksheet and Schedule A)
5. Updates / More Detail from IFR 136 (issued May 22 2020)
For The Next 45 Minutes or so…
This Presentation Will This Presentation Will Not
• Summarize eligible costs for • Go over detailed calculations
forgiveness • Review every line of every form,
• Review documents required schedule and worksheet
• Explain safe harbor and • Give specific advice for your
exception business
• Go over contents of
• Schedule A & Worksheet
• Application for Forgiveness
PPP Forgiveness Overview
Applying for PPP Loan Forgiveness
• Forgiveness Forms -11 pages
• Breaks into five pieces; 1 and 2 must be submitted to Lender:
1. PPP Forgiveness Application and Attestation (pp 3 & 4)
1. Application instructions (pp 1 & 2)
2. Schedule A (p 6)
1. Schedule A instructions (p 5)
3. Schedule A worksheet (p 9)
1. Schedule A worksheet instructions (pp 7-8)
4. Documents Required with Submission and Documents to Retain (p 10)
5. Borrower Demographics (p 11)
What You Submit
And back-up records that we will go over
Alternative Covered Period
Covered Period: eight-week (56-day) Covered Period of your PPP loan. The first day of the Covered Period
must be the same as the PPP Loan Disbursement Date.
Alternative Payroll Covered Period: Borrowers with a biweekly (or more frequent) payroll schedule may
elect to calculate eligible payroll costs using the eight-week (56-day) period that begins on the first day of
their first pay period following their PPP Loan Disbursement Date.
For example, if the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay
period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period
is April 26
Borrowers who elect to use the Alternative must apply the Alternative wherever there is a reference to “the
Covered Period or the Alternative Payroll Covered Period.”
However, Borrowers must apply the Covered Period (not the Alternative Payroll Covered Period) wherever
there is a reference to “the Covered Period” only.
8
Required FTE Calculation
The actual loan forgiveness amount that the Borrower will receive may be less,
depending on whether the Borrower’s average weekly number of FTE employees during
the Covered Period or the Alternative Payroll Covered Period was less than during the
Borrower’s chosen reference period.
For each employee, for the appropriate period (Covered or Alternate Covered)
1. Take the average number of hours paid per week, divide by 40, and round the total to
the nearest tenth.
• The maximum for each employee is capped at 1.0.
2. Or, simply assign a 1.0 for employees who work 40 hours or more per week and 0.5 for
employees who work fewer hours
9
When Completing You Will Need
• PPP Forgiveness Application package:
• www.sba.gov/ppp under ‘Loan Details and Forgiveness
• Calendar
• Calculator
• Loan documents
• Business records for use when applying
• Patience and…
Smile!
Resource Partners of the SBA
Texas Gulf Coast WBEA Women’s Business Houston SCORE
Small Business Center (WBC)
Development Center (SBDC)
713-752-8444 713-681-9232 713-487-6565
www.sbdc.uh.edu www.wbea- www.houston.score.org
texas.org/womens-business-
center
12
SBA Resources & Links
For EIDL Loan Applicants Houston District Office - SBA Other SBA District Offices
• 1-800-659-2955 • 713-773-6500 www.sba.gov/about-sba/sba-
• e-mail • Houston@sba.gov locations
disastercustomerservice@sba.
gov • Twitter: @SBA_Houston
• www.sba.gov/funding- • www.sba.gov/tx/houston
programs/disaster-assistance (look under ‘Coronavirus’)
PPP Forgiveness Application PPP Forgiveness Guidance
www.sba.gov/document/sba-form--paycheck- Most Recent:
protection-program-loan-forgiveness- https://home.treasury.gov/system/files/136/PPP-
IFR-Loan-Forgiveness.pdf
application
General: https://www.sba.gov/funding-
programs/loans/coronavirus-relief-
options/paycheck-protection-program
13
Costs Eligible for
Forgiveness
What is ‘Payroll Cost’
Original IFR III 2 ii f
Payroll costs consist of
• compensation to employees (whose principal place of residence is the United States) in the form
of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on
employer records of past tips or, in the absence of such records, a reasonable, good-faith
employer estimate of such tips);
• payment for vacation, parental, family, medical, or sick leave;
• allowance for separation or dismissal;
• payment for the provision of employee benefits consisting of group health care coverage,
including insurance premiums, and retirement;
• payment of state and local taxes assessed on compensation of employees;
• and for an independent contractor or sole proprietor,
• wage, commissions, income, or net earnings from self-employment or similar compensation.
Summary of Eligible Costs - Payroll
• Payroll costs paid and payroll costs incurred during the eight-week (56-day) Covered Period
• Payroll costs are considered paid on the day that paychecks are distributed or the Borrower
originates an ACH credit transaction.
• Payroll costs are considered incurred on the day that the employee’s pay is earned.
• Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered
Period are eligible for forgiveness if paid on or before the next regular payroll date.
• Otherwise, payroll costs must be paid during the Covered Period.
• For each individual employee, the total amount of cash compensation eligible for forgiveness
may not exceed an annual salary of $100,000, as prorated for the covered period.
• Count payroll costs that were both paid and incurred only once.
• For information on what qualifies as payroll costs, see Interim Final Rule on Paycheck Protection
Program posted on April 2, 2020 (85 FR 20811).
Summary of Eligible Costs – Non Payroll
• Covered mortgage obligations:
• payments of interest (not including any prepayment or payment of principal) on any
business mortgage obligation on real or personal property incurred before February 15,
2020
• Covered rent obligations:
• business rent or lease payments pursuant to lease agreements for real or personal
property in force before February 15, 2020
• Covered utility payments:
• business payments for a service for the distribution of electricity, gas, water,
transportation, telephone, or internet access for which service began before February 15,
2020
• An eligible nonpayroll cost must be paid during the Covered Period or incurred during
the Covered Period and paid on or before the next regular billing date, even if the
billing date is after the Covered Period.
• Eligible nonpayroll costs cannot exceed 25% of the total forgiveness amount.
• Count nonpayroll costs that were both paid and incurred only once
Documents Required
Documents to Submit for Payroll
Document to Submit for FTE
Documents to Submit for Non Payroll
Required to Keep (6 Years); Not Submit
PPP Forgiveness
Application
Schedule A Worksheet
Safe Harbor & Exception
Schedule A Worksheet
24
Sched A Worksheet - Table 1
25
Sched A Worksheet - Table 2
26
FTE Reduction Safe Harbor
Borrower is exempt from the reduction in loan forgiveness based
on FTE employees described above if both of the following
conditions are met:
1. the Borrower reduced its FTE employee levels in the period
beginning February 15, 2020, and ending April 26, 2020; and
2. the Borrower then restored its FTE employee levels by not
later than June 30, 2020 to its FTE employee levels in the
Borrower’s pay period that included February 15, 2020
FTE Reduction Exception
Indicate the FTE of
1. any positions for which the Borrower made a good-faith, written offer to
rehire an employee during the Covered Period or the Alternative Payroll
Covered Period which was rejected by the employee; and
2. any employees who during the Covered Period or the Alternative Payroll
Covered Period
1. were fired for cause
2. voluntarily resigned, or
3. voluntarily requested and received a reduction of their hours.
3. In all of these cases, include these FTEs only if the position was not filled by
a new employee.
4. Any FTE reductions in these cases do not reduce the Borrower’s loan
forgiveness
PPP Forgiveness
Application
Schedule A
Schedule A
PPP Schedule A
PPP Schedule A
PPP Schedule A
PPP Schedule A
PPP Schedule A
PPP Forgiveness
Application
Forgiveness Application
PPP Forgiveness Application pg 1
PPP Forgiveness Application pg 1
PPP Forgiveness Application pg 1
PPP Forgiveness Application pg 1
PPP Forgiveness Application pg 1
PPP Forgiveness Application pg 2
PPP Forgiveness Application pg 2
PPP Forgiveness Application pg 2
Smile!
May 22 IFR 136 / Borrower
Pertinent Summary
See the IFR for all details
https://home.treasury.gov/system/files/136/PPP-IFR-SBA-Loan-Review-Procedures-and-Related-
Borrower-and-Lender-Responsibilities.pdf
IRF 136 - 2. Loan Forgiveness Process
( 1 of 2)
… complete and submit the Loan Forgiveness Application… 3508 or lender equivalent… to
lender.
… The lender has 60 days from receipt of a complete application to issue a decision to SBA.
…SBA will deduct EIDL Advance Amounts from the forgiveness amount remitted to the
Lender…
If SBA determines in the course of its review that the borrower was ineligible for the PPP
loan … the loan will not be eligible for loan forgiveness.
The lender is responsible for notifying the borrower of the forgiveness amount.
IRF 136 - 2. Loan Forgiveness Process
(2 of 2)
If only a portion of the loan is forgiven, or if the forgiveness request is denied, any
remaining balance … must be repaid … on or before the two-year maturity of the loan.
If the amount remitted by SBA to the lender exceeds the remaining principal balance …
the lender must remit the excess amount, including accrued interest, to the borrower.
The general loan forgiveness process … applies only to loan forgiveness applications that
are not reviewed by SBA prior to the lender’s decision on the forgiveness application.
In a separate interim final rule … SBA will describe its procedures for reviewing PPP loan
applications and loan forgiveness
IRF 136 – 3. Payroll Costs Eligible for Loan Forgiveness
a. When must payroll costs be incurred and/or paid to be eligible for forgiveness?
Borrowers may seek forgiveness for payroll costs for the eight weeks beginning on either:
i. the date of disbursement of the borrower’s PPP loan proceeds from the Lender (i.e., the
start of the covered period);
ii. Or the first day of the first payroll cycle in the covered period (the “alternative payroll
covered period”).
… Payroll costs incurred during the borrower’s last pay period of the covered period or the
alternative payroll covered period are eligible for forgiveness if paid on or before the next
regular payroll date; otherwise, payroll costs must be paid during the covered period (or
alternative payroll covered period) to be eligible for forgiveness.
… this alternative computational method is limited to payroll cycles that are bi-weekly or more
frequent,
IRF 136 - 3a. Example
A borrower has a bi-weekly payroll schedule (every other week).
The borrower’s eight-week covered period begins on June 1 and ends on July 26.
The first day of the borrower’s first payroll cycle that starts in the covered period is June 7.
The borrower may elect an alternative payroll covered period for payroll cost purposes that
starts on June 7 and ends 55 days later (for a total of 56 days) on August 1.
Payroll costs paid during this alternative payroll covered period are eligible for forgiveness.
In addition, payroll costs incurred during this alternative payroll covered period are eligible
for forgiveness as long as they are paid on or before the first regular payroll date occurring
after August 1.
Payroll costs that were both paid and incurred during the covered period (or alternative
payroll covered period) may only be counted once.
IRF 136 - 3b. Are salary, wages, or commission payments to furloughed
employees; bonuses; or hazard pay during the covered period eligible for loan
forgiveness?
Yes
IRF 136 - 3c. Are there caps on the amount of loan forgiveness available for owner-
employees and self-employed individuals’ own payroll compensation?
Yes… lesser of 8/52 of 2019 compensation… or $15,385 per individual in total across all
businesses.
In particular … capped by the amount of their 2019 employee cash compensation and
employer retirement and health care contributions made on their behalf.
Schedule C filers … by the amount of their owner compensation replacement, calculated
based on 2019 net profit.
General partners … by the amount of their 2019 net earnings from self-employment
(reduced by claimed section 179 expense deduction, unreimbursed partnership expenses,
and depletion from oil and gas properties) multiplied by 0.9235.
No additional forgiveness is provided for retirement or health insurance contributions for
self-employed individuals, including Schedule C filers and general partners, as such
expenses are paid out of their net self-employment income.
IRF 136 - 4. Nonpayroll Costs Eligible for Loan Forgiveness (1 of 2)
a. When must nonpayroll costs be incurred and/or paid to be eligible for forgiveness?
…if it was
(i) paid during the covered period; or
(ii) incurred during the covered period and paid on or before the next regular
billing date, even if the billing date is after the covered period.
IRF 136 – 4a Example
A borrower’s covered period begins on June 1 and ends on July 26.
The borrower pays its May and June electricity bill during the covered period and
pays its July electricity bill on August 10, which is the next regular billing date.
The borrower may seek loan forgiveness for its May and June electricity bills,
because they were paid during the covered period.
In addition, the borrower may seek loan forgiveness for the portion of its July
electricity bill through July 26 (the end of the covered period), because it was
incurred during the covered period and paid on the next regular billing date.
… The Administrator believes that this simplified approach to calculation of
forgivable nonpayroll costs is also supported by considerations of administrative
convenience for borrowers, and the Administrator notes that the 25 percent cap on
nonpayroll costs will avoid excessive inclusion of nonpayroll costs.
IRF 136 - 4b. Are advance payments of interest on mortgage obligations eligible
for loan forgiveness?
No
IRF 136 – 5. Reductions to Loan Forgiveness Amount
a. Will a borrower’s loan forgiveness amount be reduced if the borrower laid-off or reduced
the hours of an employee, then offered to rehire the same employee for the same salary and
same number of hours, or restore the reduction in hours, but the employee declined the
offer?
No
FAQ/Summary of IRF 136 (1 of 2)
5b. What effect does a reduction in a borrower’s number of full-time equivalent (FTE)
employees have on the loan forgiveness amount?
The borrower must first select a reference period:
(i) February 15, 2019 through June 30, 2019;
(ii) January 1, 2020 through February 29, 2020;
(iii) in the case of a seasonal employer, either of the two preceding methods or a
consecutive 12-week period between May 1, 2019 and September 15, 2019.
FAQ/Summary of IRF 136 (2 of 2)
5b. What effect does a reduction in a borrower’s number of full-time equivalent (FTE)
employees have on the loan forgiveness amount?
If the average number of FTE employees during the covered period or the alternative
payroll covered period is less than during the reference period, the total eligible
expenses available for forgiveness is reduced proportionally by the percentage
reduction in FTE employees.
For example, if a borrower had 10.0 FTE employees during the reference period and
this declined to 8.0 FTE employees during the covered period, the percentage of FTE
employees declined by 20 percent and thus only 80 percent of otherwise eligible
expenses are available for forgiveness.
IRF 136 – 5c. What does “full-time equivalent employee” mean?
Full-time equivalent employee means an
employee who works 40 hours or more, on
average, each week.
IRF 136 - 5d. How should a borrower calculate its number of full-time equivalent
(FTE) employees? (1 of 2)
… borrowers must divide the average number of hours paid for each employee per
week by 40, capping this quotient at 1.0.
For example, an employee who was paid 48 hours per week during the covered
period would be considered to be an FTE employee of 1.0.
… less than 40 hours per week, borrowers may choose to calculate … in one of two
ways.
First …the average number of hours a part-time employee was paid per week during
the covered period. For example, if an employee was paid for 30 hours per week on
average during the covered period, the employee could be considered to be an FTE
employee of 0.75.
IRF 136 - 5d. How should a borrower calculate its number of full-time equivalent
(FTE) employees? (2 of 2)
Second… borrowers may elect to use a full-time equivalency of 0.5 for 18 each part-time
employee.
… must apply (the chosen) method consistently …
… the borrower shall provide the aggregate total of FTE employees for both the selected
reference period and the covered period or the alternative payroll covered period, by
adding together all of the employee-level FTE employee calculations.
The borrower must then divide the average FTE employees during the covered period or
the alternative payroll covered period by the average FTE employees during the selected
reference period, resulting in the reduction quotient.
IRF 136 – 5e. What effect does a borrower’s reduction in employees’ salary or
wages have on the loan forgiveness amount?
… a reduction in an employee’s salary or wages in excess of 25 percent will
generally result in a reduction in the loan forgiveness amount… This reduction
calculation is performed on a per employee basis, not in the aggregate.
IRF 136 – 5e. Example
A borrower reduced a full-time employee’s weekly salary from $1,000 per
week during the reference period to $700 per week during the covered
period.
The employee continued to work on a full-time basis during the covered
period with an FTE of 1.0.
In this case, the first $250 (25 percent of $1,000) is exempted from the
reduction.
Borrowers seeking forgiveness would list $400 as the … reduction for that
employee (the extra $50 weekly reduction multiplied by eight weeks).
IRF 136 - 5f. How should borrowers seeking loan forgiveness account for the
reduction based on a reduction in the number of employees … …relative to the
reduction relating to salary and wages …?
To ensure that borrowers are not doubly penalized, the salary/wage reduction applies
only to the portion of the decline in employee salary and wages that is not attributable to
the FTE reduction.
… the salary/wage reduction applies only to the portion of the decline in employee salary
and wages that is not attributable to the FTE reduction.
… Congress intended to distinguish between an FTE reduction on the one hand and a
reduction in hourly wages or salary on the other hand.
IRF 136 - 5f. Example
An hourly wage employee had been working 40 hours per week during the borrower
selected reference period (FTE employee of 1.0)
and the borrower reduced the employee’s hours to 20 hours per week during the
covered period (FTE employee of 0.5).
There was no change to the employee’s hourly wage during the covered period.
Because the hourly wage did not change, the reduction in the employee’s total wages is
entirely attributable to the FTE employee reduction
and the borrower is not required to conduct a salary/wage reduction calculation for that
employee.
IRF 136 - 5g. If a borrower restores reductions made to employee salaries and
wages or FTE employees by not later than June 30, 2020, can the borrower avoid a
reduction in its loan forgiveness amount?
Yes
IRF 136 – 5h. Will a borrower’s loan forgiveness amount be reduced if an employee
is fired for cause, voluntarily resigns, or voluntarily requests a schedule reduction?
No
SBA Resources
Texas Gulf Coast WBEA Women’s Business Houston SCORE
Small Business Center (WBC)
Development Center (SBDC)
713-752-8444 713-681-9232 713-487-6565
www.sbdc.uh.edu www.wbea- www.houston.score.org
texas.org/womens-business-
center
For EIDL Loan Applicants Houston District Office - SBA Other SBA District Offices
• 1-800-659-2955 • 713-773-6500 www.sba.gov/about-sba/sba-
• (TTY: 1-800-877-8339) locations
• Houston@sba.gov
• e-mail
disastercustomerservice@sb • Twitter: @SBA_Houston
a.gov
69
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