New SBA PPP Loan Forgiveness Guidance

Published by BradyRenner CPAs | August 11, 2020

Dear clients and partners,

Good day! We are continuing to update you as new details come in regarding critical policies and programs during this unprecedented time, the chief among these being the federal Paycheck Protection Program (PPP) administered by the Small Business Administration (SBA).

Just days ago, the SBA released additional clarifications on how the PPP loan forgiveness process will work, and what it means to ensure that a loan is eligible for forgiveness. The FAQ document is ten pages long so there is a lot to absorb. Below are highlights of some of the key points and provisions:

Key Points: Loan Forgiveness Process

Forgiveness Filing Period: A borrower who submits their PPP loan forgiveness application within 10 months after the end of the covered period will not need to make any principal or interest payments prior to the date the SBA remits the loan forgiveness amount to the taxpayer’s lender. In addition, borrowers whose PPP loans were disbursed prior to June 5, 2020 have the option of choosing an eight-week or 24-week covered period.

Solopreneurs: Sole proprietors, independent contractors and self-employed individuals with no employees are automatically eligible for the Loan Forgiveness Form 3508EZ (i.e. the EZ form).

Electronic Documents: The SBA says it is permissible to use scanned documents, e-signatures and e-consent forms in the application and supporting documents. However, lenders may apply additional requirements on top of the SBA standard so check with your lender directly as well.

Loan Payments & Interest: Borrowers are not required to make any payments against the loan as long as they submit their loan forgiveness application within ten (10) months after the Covered Period is complete. However, interest will accrue and if the loan is not forgiven, that interest will be due along with the applicable principal.

Key Points: Loan Forgiveness Reductions

Employee Rehiring: If your company offers to rehire an employee in writing and they refuse to accept the offer, you must document it and notify your state unemployment or labor agency. If you do these things, the employee’s decision should not reduce your loan forgiveness.

Filling Open Positions: If your company cannot identify or secure qualified individuals for open positions, again document this so that the SBA can recognize this and in so doing, it should not reduce your loan forgiveness.

Calculating Wage Reductions: When calculating if you have reduced wages more than 25% for the purposes of your loan forgiveness reduction thresholds, look only the wages and salaries, not tips, bonuses, commissions, etc. (i.e. the loss of these does not impact the calculation).

Key Points: Payroll Costs

  • All costs incurred or paid during your Covered Period (either the standard Covered Period or the Alternative Payroll Covered Period, whichever you have chosen) are forgivable.
  • In calculating payroll for forgiveness eligibility, the borrower may include lost tips, commissions, bonuses, incentive pay, hazard pay, etc. if these are actually amounts paid to the employee(s) — subject to the annual cap.
  • Only employer-paid healthcare expenses are eligible (i.e. not employee-paid ones).
  • Only employer-paid retirement expenses are eligible (i.e. not employee-paid ones).
  • Payroll costs applicable to business owners themselves are subject to a variety of additional rules and must be evaluated carefully. For example, even if you own multiple businesses and each business secures a PPP loan, you may not be able to remunerate your payroll costs through multiple entities. Discuss the details with us if applicable to your situation.

Key Points: Other Costs

  • All non-payroll costs that are eligible for forgiveness (examples include items such as rent/utilities/mortgage) which are paid or incurred during the Covered Period are eligible for loan forgiveness.
  • If you elected the Alternative Payroll Covered Period, you must use the standard Covered Period to calculate your forgiveness of non-payroll costs.
  • In the case of leases or mortgages, even if you signed a lease or secured a mortgage after February 15, they are still forgiveness-eligible as long as they are for existing property (i.e. a lease renewal or a mortgage refinancing) and not for new property.
  • All costs paid to utilities are included as eligible for forgiveness (i.e. the actual invoice amount paid to the utility, even if much of it is for fees, taxes and other charges).

As you can see, there is a lot to absorb here, and we only touched up some of the top points. You can review the full SBA PPP Program Loan Forgiveness FAQ document here and of course, reach out to us with any questions.

Thank you again and have a good week.


Matt Brady, CPA