The US Small Business Administration (SBA) announced the terms and conditions for forgiveness of Paycheck Protection Program (PPP) Loan Amounts. The agency issued an 11-page Paycheck Protection Program Loan Forgiveness Application, which can be accessed through the following link. The application walks borrowers through a step-by-step process to determine loan forgiveness amounts based upon the information the borrower enters.
The SBA does not require borrowers to provide documentation to support the payroll and non-payroll costs paid using PPP Loan funds at the time of submission, but borrowers should maintain this document in the event of an audit. We suggest segregating this information and maintaining it 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.
Borrowers must be able to rove the funds were properly spent on covered liabilities incurred, or which became due, during the 8-week period following disbursement of the PPP Loan funds. Substantiation requires borrowers to provide, among other things:
- 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.
- Documents 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).
Again, the application requires the borrower to maintain, books and records, but not submit with the application itself, this documentation.
Applications are submitted under penalties of perjury and require certification as to the accuracy of the information in the application, and the documentation provided. Due care should be taken, as ANY errors in the form, could result in criminal prosecution under the Federal False Claims Act, and in circumstances of intentionally false statements, wire fraud or major fraud against the United States other actions which carry serious criminal penalties. Be diligent when preparing your application and all maintain all relevant information for an audit or other review– there is a six-year (6) statute of limitations at play, from the time that the loan is forgiven (or repaid in full).