The SBA recently released its guidance around PPP loan forgiveness, and across the nation, banks and small businesses are starting to tackle this important next step in the PPP process. Many banks, including Bremer, are now able to start defining their loan forgiveness process. And while these details aren’t final yet, here’s what we know right now.
What changed and what didn’t: A look at SBA guidance
The SBA guidance included a few tweaks to improve the forgiveness process for small businesses, from allowing closer alignment to regular payroll cycles to an additional safe harbor. While SBA’s press release gives a brief overview of these changes, let’s dive into a little of the detail behind each one.
Alternative eight-week period
Original guidance stated that the eight-week period to use PPP funds would begin the day the borrower received their funds. However, as detailed in the forgiveness application, borrowers are now permitted to calculate payroll costs using an “alternative” eight-week period that aligns with their regular payroll cycles.
Exemption from forgiveness reduction
According to the new guidance, borrowers who can provide proof that a worker or workers declined a good-faith, written offer of rehiring can avoid a loan forgiveness reduction on these workers.
Incurred versus paid
New guidance states that any payroll and eligible nonpayroll expenses incurred – but not paid – during the covered period are eligible to counted in the loan forgiveness calculations, as long as they are paid by the next regular payroll or billing date.
Additional safe harbor
Borrowers who demonstrate a restoration of workforce by June 30 to their workforce level that was in place on Feb. 15 can obtain safe harbor from forgiveness reduction.
Start from the back: Each section as a building block
At 11 pages long, the PPP forgiveness application might seem a little intimidating at first. It’s helpful to look at the overall document in key sections, and then to tackle them in a sequence that makes sense.
While the document from the SBA begins with the official application itself, it may be easier to look at its major sections in reverse.
For instance, look at page 10. This includes a listing of all the documents you will need to submit with your loan forgiveness application. It also includes a list of other records you will need to maintain for audit and recordkeeping purposes. You will need to collect both sets of documents before you are able to complete the rest of the application document.
Likewise, the Worksheet (page 9) should be completed before Schedule A (page 6). And Schedule A should be completed before the Calculation (pages 1-3).
So, despite its position at the back of the SBA document, pull page 10 front and center and start there. This page gives specifics about the exact records to collect. Using these records, you can begin to proceed ahead in the document. Complete the Worksheet (pages 7-9) first, then complete Schedule A (pages 5-6), then complete your Calculation (pages 1-4).
Break it down: The key sections of the forgiveness application
The application form consists of several main sections, which we suggest looking at in reverse:
Borrower Demographics (page 11)
This is an optional form, collecting additional demographic information about your business.
Document Checklist (page 10)
This is a helpful collection listing all the documents required to accompany your application.
Worksheet (pages 7-9)
This is a building block to your application. This worksheet will help you calculate a variety of the numbers you enter on Schedule A.
Schedule A (pages 5-6)
Again, the SBA created another building block in the application. This section of the document is designed to help you build some of the numbers used in your Loan Forgiveness Calculation to come next.
Loan Forgiveness Calculation (pages 1-4)
The first two pages define the terms used on the forgiveness application, as well as give some high-level instructions for what’s to come. Page 3 is essentially your application form, where you will input your final calculated numbers from other steps. You will need your SBA PPP loan number and other original details from your PPP loan to complete this page.
Upon completion of those calculations, you will be asked to certify a variety of statements on page 4, in order to complete your application.
Making it simple: Working with your banker
If your PPP loan was funded through Bremer, your banker will reach out to you as we develop our loan forgiveness processes. We are working on ways to help simplify and streamline parts of the process. Be sure to check bremer.com/ppp for details as they come available.