On Friday, May 15, 2020, the Small Business Association (“SBA”) released the Paycheck Protection Program (“Program”) Loan Forgiveness Application (“Application”). The Application outlines how to apply for forgiveness of the Program loans under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

Under the CARES Act, a borrower is required to spend the amount of the loan during an eight week “covered period” in order to be eligible for loan forgiveness. This covered period begins on the date of disbursement of the loan proceeds. However, the Application provides borrowers with an alternative eight week covered period to align with their regular payroll cycles. Borrowers who have a biweekly (or more frequent) payroll schedule, may elect to calculate eligible payroll costs using the eight week period that begins on the first day of the pay period following the loan disbursement.

Additionally, the Application clarifies that covered expenses must be incurred during the covered period, but do not have to be paid during the covered period, providing borrowers with greater flexibility. These expenses must be paid by the next payroll or billing date. The CARES Act specifies covered expenses that are eligible for forgiveness which include payroll costs as well as rent and utility payments and interest on any mortgage obligations that existed prior to February 15, 2020.

The Application instructs borrowers on how to calculate the reduction in the forgiveness amount for borrowers that had a reduction in full-time equivalent employees. Under the CARES Act, the loan forgiveness amount is reduced if there has been a reduction in full-time equivalent employees. The Application provides an exemption from the loan forgiveness reduction for borrowers who have made “a good-faith, written offer to rehire workers that was declined.” Additionally, there is an exemption from forgiveness reduction if a borrower can show that they restored their workforce by June 30, 2020 to the level in place on February 15, 2020.

The full Application can be found here.

The SBA and the Department of Treasury plan to issue additional guidance on loan forgiveness in the coming days.

Bowles Rice continues to closely monitor federal, state and local developments related to the novel coronavirus pandemic. Be sure to visit the COVID-19 Response Team page on our website for a comprehensive listing of available services.

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If you have questions about the PPP or would like more information, please contact one of the following Bowles Rice attorneys: