PPP Loan Forgiveness Guidance from the SBA
The US Small Business Administration (SBA) recently shared the terms and conditions for the Paycheck Protection Program PPP Loan forgiveness amounts. The agency issued an 11-page forgiveness application that walks borrowers through a step-by-step process. This application is interactive and allows borrowers to enter information that ultimately determines loan forgiveness amounts.
While the Small Business Administration is not requiring borrowers to provide documentation that supports the payroll and non-payroll costs paid using PPP Loans at the time of PPP loan forgiveness submission, in case of an audit, borrowers should continue to maintain this documentation. Below are a few pieces of critical documentation that small businesses should keep in the event of an audit:
- Each relevant employee’s date of hire/furlough/firing and the wages and any wage reductions, or reversal of such reductions, made to that employee.
- Proof that no amounts paid to employees were in excess of the $100K annualized cap, or, if they were, that it was not paid with PPP Funds.
- Any job offers, firings, furloughs, rehires, and evidence of any employee who refused to be rehired after a written offer was provided.
Furthermore, small businesses that utilized the PPP Loan funds must be able to prove that the money borrowed was spent on covered liabilities incurred, or which became due, during the 8-week period following disbursement of funds. Ways in which small business will be required to prove that they used loans for approved expenditures are listed below:
- Bank account statements or payroll provider records, payroll tax forms, and state employee wage reporting, as well as payment receipts, canceled checks or account statements showing payments to employee health or retirement plans.
- Documents showing the average number of full-time equivalent employees for either the period of February 15, 2019, through June 30, 2019 or January 1, 2020, through February 29, 2020.
- Papers showing business mortgage interest payments, copies of lender amortization schedules, or canceled checks verifying payments.
- Documents showing rent or lease payments, including copies of the current lease and receipts or canceled checks verifying the eligible payments.
- Documents showing all utility payments with invoices from February 2020 and from the 8 weeks following disbursement of the loans, including the utility bill one month after the 8-week period (to cover the full amounts of such utilities used during the 8-week period).
While this documentation is recommended, it is not required at the time when the PPP loan forgiveness application is submitted.
Though documentation is not required to submit a PPP loan forgiveness application, this form is submitted under penalties of perjury and requires those which fill them out to certify the accuracy of the information in the application. Thus, before submission, extreme care should be taken, as a minor error in the form could result in legal consequences. Small business which intentionally or accidentally submit incorrect information face criminal prosecution under the Federal False Claims Act. In order to avoid potential issues, be extra cautious before, during, and when reviewing this application. Finally, you should continue to document all relevant information for an audit or other possible governmental reviews as there is a six-year statute of limitations on these documents which starts once a loan is paid in full or forgiven.
As the 11-page PPP loan forgiveness application is very detailed and offers borrowers large amounts of information pertaining to what is eligible for forgiveness and what may not be, we recommend that all businesses review the forgiveness application carefully. This review process encompasses every business even if they use outside accountants. As a leading business law firm, Antonoplos & Associates is here to assist companies to prepare their applications, answer questions related to the forgiveness aspect, and review applications prior to submission.