October 27, 2020
On October 8, 2020, the United States Small Business Administration (“SBA”) published a one page application for borrowers seeking forgiveness under the Paycheck Protection Program (“PPP”). The application may be used by borrowers that received PPP loans in the amount of $50,000 or less. In conjunction with the release of the application, the SBA published revisions to the rules and regulations governing loan forgiveness for PPP borrowers of less than $50,000. Those revisions provide that borrowers of less than $50,000 who use the new one page application are “exempt from any reductions in the borrower’s loan forgiveness amount based on reductions in full-time equivalent (FTE) employees (section 1106(d)(2) of the CARES Act) or reductions in employee salary or wages (section 1106(d)(3) of the CARES Act) that would otherwise apply.”
The simplicity of the one page application reflects these exemptions. Unlike the previously published forgiveness applications, the new application does not require forgiveness calculations or worksheets. Even so, borrowers must continue to use the SBA’s rules and regulations to determine the forgiven amount of their PPP loan. The new application requires the borrower to certify that the PPP loan proceeds were used in accordance with the rules and regulations and that the borrower is eligible for forgiveness.
The new application and revised rules and regulations also reduce the documentation required to be submitted to and reviewed by lenders. While borrowers must maintain all documents otherwise required under the PPP, a borrower using the one page application only needs to submit the following documentation to their lender:
Payroll: Documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period or the Alternative Payroll Covered Period consisting of each of the following:
a. Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
b. Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period: i. Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and ii. State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
c. Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the Borrower included in the forgiveness amount.
Nonpayroll: Documentation verifying existence of the obligations/services prior to February 15, 2020 and eligible payments from the Covered Period.
a. Business mortgage interest payments: Copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
b. Business rent or lease payments: Copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the Covered Period; or lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.
c. Business utility payments: Copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments.
Finally, lenders in receipt of the new application from borrowers of less than $50,000 must be sure to:
i. Confirm receipt of the borrower certifications contained in the new application; and
ii. Confirm receipt of the documentation the borrower must submit to aid in verifying payroll and nonpayroll costs, as detailed above.
The SBA has made clear that lenders may rely upon borrower certifications in forgiveness applications, as “[p]roviding an accurate calculation of the loan forgiveness amount is the responsibility of the borrower, and the borrower attests to the accuracy of its reported information and calculations on the Loan Forgiveness Application.”
The one page application is available on the SBA’s website here, application instructions are available here, and the pertinent revisions to the SBA’s rules and regulations are available here.
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