PPP Loan Forgiveness Guidance from the SBA

Legal Article

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.  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.


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. However, 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:

  1. 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.
  2. 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.
  3. Any job offers, firings, furloughs, rehires. Evidence of any employee who refused to be rehired after a written offer was provided.

Required Documents

Furthermore, small businesses that utilize the PPP Loan funds must be able to prove that the money borrowed was spent on covered liabilities incurred. This allows for when bills became due during the 8-week period following disbursement of funds. Ways in which small businesses must prove how they plan to use the money for expenditures are listed below:

  1. 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.
  2. 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.
  3. Papers showing business mortgage interest payments, copies of lender amortization schedules, or canceled checks verifying payments.
  4. Documents showing rent or lease payments, including copies of the current lease and receipts or canceled checks verifying the eligible payments.
  5. 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 the government recommends this documentation, they do not require it at the time when the PPP loan forgiveness application is submitted.

Additional Tips

The government does not require documentation to submit a PPP loan forgiveness application. However, the borrower submits this form under penalties of perjury. This requires those which fill them out to certify the accuracy of the information in the application. Thus, before submitting the form, the borrower must take extreme care, as a minor error will result in legal consequences. Small businesses that 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. There is a six-year statute of limitations on these documents. This start date begins once a borrower pays the loan in full or forgiven.

Final Thoughts

The 11-page PPP loan forgiveness application has a lot of detail and offers borrowers large amounts of information. This information is important as it describes what is eligible for forgiveness and as such should be carefully reviewed. Thus, 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. Furthermore, our firm can answer questions related to the forgiveness aspect and review applications prior to submission.