There have been ongoing developments from the Small Business Administration (SBA) about the Paycheck Protection Program that are important for anyone who has borrowed money under that program and is either seeking or will seek forgiveness:
New, Simpler Forgiveness ApplicationsLate last week, the SBA and the Department of the Treasury released a revised PPP loan forgiveness application, which has been shortened from 11 pages to five (instructions can be found here).
Required documentation for Forgiveness Applications includes a PPP Schedule A, which is attached to the loan forgiveness application, and supplemental borrower-provided documentation verifying payroll and nonpayroll costs and full-time equivalent employees (FTEEs). The borrower is required to list information about employee compensation and FTEEs’ hours to determine whether there will be any reductions in the loan forgiveness amount. Typical documentation for verifying a borrower’s payroll and nonpayroll costs and FTEEs would consist of bank accounts, payment receipts, payroll tax filings reported to the IRS, lease agreements, utility invoices and copies of lender amortization schedules.
Voluntary documentation includes what is called a PPP Borrower Demographic Information Form. The form requests information about each of a borrower’s principals to collect data on veteran status, gender, race and ethnicity for PPP reporting purposes.
In addition, they released a new EZ version of the forgiveness application, Form 3850EZ, which is intended to be used by borrowers who (i) are self-employed and have no employees; or (ii) did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; or (iii) experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%. Instructions can be seen here. There are fewer calculations to determine loan forgiveness amounts and less documentation required for those borrowers using the EZ version of the loan forgiveness application, in addition to making certain representations and certifications.
In the event of an audit, all documentation identified in the loan forgiveness application instructions and all records relating to a borrower’s PPP loan must be maintained in a borrower’s files for at least six years after the date the loan is forgiven or repaid in full.