Employers get guidance on PPP loan forgiveness

Many employers were eager to take advantage of a provision in federal coronavirus relief legislation that provided loans to help businesses meet payroll and cover certain other costs during the COVID-19 crisis. Those loans will be forgiven provided employers keep workers employed or call them back to work quickly. But it wasn't immediately clear what had to be done to qualify for loan forgiveness. Now, however, the Small Business Administration (SBA), in consultation with the U.S. Department of the Treasury, has issued the Paycheck Protection Program (PPP) Loan Forgiveness Application, which provides some answers.

Relief for employers

The PPP was one of the provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law by President Donald Trump on March 27. The PPP provided loans for payroll costs, rent obligations, mortgage interest expenses, and utilities incurred and paid during an eight-week period beginning on the date a PPP loan was funded.

The SBA application is the first guidance that helps borrowers track and calculate loan forgiveness. Following is a summary of the notable forgiveness application terms relevant to many businesses.

Forgiveness for payroll and nonpayroll costs

The SBA's application form and related instructions clarify the much-debated "incurred and paid" language of the PPP. Specifically, borrowers are eligible for forgiveness for both the payroll costs paid and those incurred (with some qualifications as noted below) during the eight-week period, giving them some flexibility in their calculations: