Preparing Your PPP Loan Forgiveness Application

Written by Daniel P. Dosch and Jeremy E. Warring
Posted May 21, 2020

We recently published an overview of the Small Business Administration’s massive Paycheck Protection Program (“PPP”) and a guide to calculating loan forgiveness under the program.  Since that time, the IRS officially barred deductions of PPP expenses, and the SBA formally lowered the audit risk for borrowers under $2 million.

Until now, borrowers and lenders alike have been in the dark as to just how loan forgiveness will work. But, on May 15, the SBA finally released the PPP Loan Forgiveness Application.  Here’s what you need to know.


The PPP loan forgiveness application consists of the following:

  • The PPP Loan Forgiveness Calculation Form (required);

  • PPP Schedule A (required);

  • The PPP Schedule A Worksheet (not submitted); and

  • PPP Borrower Demographic Information Form (optional).

What You Need

To complete the application, you will need the following information:

  • Your basic business information (EIN, contact information, etc.);

  • The details of your PPP loan (amount, EIDL advance amount and application number, SBA and lender loan numbers, disbursement date, etc.);

  • Your payroll period, payment frequency, and number of employees;

  • A detailed calculation of your loan forgiveness amount; and

  • A detailed accounting of payroll expenses (Schedule A).

How to File

 Submit your application to your lender.  Check with your lender to ensure proper formatting.

Key Takeaways

Within the application and instructions, the SBA provided some additional guidance regarding a few issues, and again left some open. Some of the key takeaways are:

  • Costs incurred and paid. The CARES Act provided that borrowers would receive forgiveness for eligible expenses “incurred and paid” during the covered period. The application clarifies that borrowers can include payroll costs for the last pay period of the covered period, so long as those costs are paid on or before the borrower’s next regular payroll date (even if that payroll date falls outside the covered period). Borrowers can also include non-payroll costs that were either paid during the covered period, and those which were incurred during the covered period and paid on or before the next regular billing date. Prepaying expenses, however, is still not allowed.

  • Alternative covered period for payroll expenses. There were a lot of questions about how to best align payroll periods to maximize the amount of payroll costs that fall within the covered period. The application allows for an alternative covered period, meaning borrowers can shift their 8 week covered period for payroll costs to line up with their regular pay cycles. This does not change the covered period for non-payroll costs, but will make tracking easier for weekly and biweekly borrowers.

  • FTE Calculations. The CARES Act provided no guidance on how to calculate FTE from an hours per week perspective. The application clarifies that employees working at least 40 hours per week count as 1 FTE, and provides a method for calculating non-full time FTE. Alternatively, borrowers may count every employee working less than 40 hours per week as .5 FTE, and avoid the alternative calculation all together. Borrowers should calculate the FTE headcount using both methods to see which maximizes forgiveness.

The Paycheck Protection Program is evolving quickly.  Lawmakers are discussing significant changes to the program, including a modification of the requirement that 75% of borrowed funds be spent on payroll to qualify for forgiveness.  Be sure to stay current with the U.S. Small Business Administration, the U.S. Department of the Treasury, and your lender. Check back with us frequently for updates.

In order to maximize your loan forgiveness and minimize audit risk, be sure to consult with legal and accounting experts.  Contact the authors and our Corporate group to discuss details and determine the best path forward.

Learn More about Messerli Kramer’s Attorneys Jeremy E. Warring

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