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Planning for Payroll Protection Act Loan Forgiveness

The first round of PPP loans was funded the week of April 6, 2020, which means the 8 week (56 day) clock for use of those funds will expire the week of June 1, 2020. While there has been discussion about extending the time period to use the funds for approved purposes, a borrower should not assume that extension will occur. Based on recent comments from the Secretary of Treasury, expanded use of funds beyond payroll, rent and utilities should not be anticipated.

To Prepare

As a borrower, if you have not been tracking your weekly disbursements for payroll and benefits, as well as rent and utilities, this is the time to organize your records. We recommend assembling the following:


-Copies of payroll records for each week since the funding of the PPP loan. This should include employee counts and dollars spent, adjusted for the maximum payments allowed for payroll to an individual ($15,385).

  • Historical data for payroll for 2019. This should include total dollars spent, and number of employees.

  • Assemble 941s for 2019 and 2020.

  • Accumulate payroll records for at least the 8 weeks post funding.

  • Show records of FTE counts for 2/15/19 to 6/30/19 and for 1/1/20 to 2/29/20.


-Copies of payments made for rent, and proof those expenditures were for arrangements in place on or before February 15, 2020.


-Copies of payments for utilities, and proof those expenditures were for arrangements in place on or before February 15, 2020.


-Copies of payments of interest, and proof those expenditures were for arrangements in place on or before February 15, 2020.

Assess dollars spent to show that at least 75% of disbursements were for payroll and payroll related expenses. The remaining 25% of disbursements can be made for rent, utilities and interest.

A few considerations relative to eligibility for forgiveness:

  • The average number of employees must be the same as in 2019, with certain adjustments for seasonality and for startups. The measurement date for employee counts is June 30, 2020.

  • Wages and salaries cannot be cut.

  • Per employee salary forgiveness is limited to a $100,000 annual run rate. $15,385 for an 8 week period.

  • Owner compensation is limited to 8/52ths of 2019 net profit.

Asking for Forgiveness

Forgiveness of the PPP funds spent under the approved guidelines, must be requested within 90 days after the expiration of the 8 weeks after the loan funded. That request is to be provided to the lender granting the PPP loan, and should use the SBA approved request for forgiveness application, as well as any additional information or documentation required by a lender.

This link takes you to the SBA loan forgiveness application on the SBA website.

Receiving Loan Forgiveness

The lender has 60 days from the date of request for forgiveness to respond to the request.

Note that any PPP loans over $2 million are subject to an audit, which has yet to be defined in terms of scope and the entity or entities who will be performing the audit. The ability for a borrower to appeal audit findings has not been determined.

What happens if the loan is not fully forgiven?

If loans are not forgiven, the original SBA loan terms will be in effect.

  • 1% interest.

  • No payments for the first six months.

  • 24 month maturity (from disbursement date).

Prepayment is allowed at any time. If a borrower has received PPP funds, and has not used those funds for the intended purposes, any or all of the funds may be returned to the lender and the SBA at any point in time.

If a borrower does not believe it complies with the requirements of the Payroll Protection Program, the borrower may repay the loan.

What are the next steps a borrower should take?

The borrower needs to assemble the information required to prove compliance with the PPP guidelines.

The borrower should complete the SBA Loan Forgiveness Application and submit that to its lender. This application for forgiveness may be filed at any time between 8 weeks post funding and 90 days post funding, but must occur within 90 days of the 8 weeks post funding.

The borrower will need to respond to questions related to the application.

Finally, the borrower will need to make repayment plans for any loan amounts not forgiven.

Contact us

FMG is ready to help borrowers assess their situation related to PPP funds. Please call us with any questions.


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