MPL General Counsel Corner – And now for your reading pleasure…PPP Forgiveness Guidance

Categories : Uncategorized
May 18, 2020

The SBA & Dept. of Treasury finally released the PPP forgiveness application.  I’d love to take credit for the overview but could not do much better than Chad Bumbaugh and the Stambaugh Ness team.  See below for their overview:

The guidance arrived in the form of the loan forgiveness application announced with this press release late yesterday afternoon.    I’ve provided below an overview of the application contents as well as some commentary from me (in bold) from my early reactions to the application.  We’ll be assessing the guidance and any further information that comes out internally so take the bold comments as my “hot takes” only for now please.  Overall, my opinion is that there are some welcomed simplifications to the requirements, one potential negative around owner’s compensation, and several items still without definitive guidance.

  • Pg. 1 – Forgiveness application requires the PPP Loan Forgiveness Calculation Form (starts on pg. 3) and the PPP Schedule A (for calculating FTE and wage limitations, this starts on pg. 6).
    • Application also includes PPP Schedule A worksheet to help with completing the form and an optional PPP borrower demographic information form (notes that there is no impact from not completing form)
  • Pg. 1 – Alternative payroll covered period detailed on first page should alleviate need for off-cycle payrolls when combined with definition of eligible payroll costs on pg. 3.  Great news!
  • Pg. 2 – interest costs guidance for forgiveness emphasizes “mortgage”.  Other interest costs now not permissible?
  • Pg. 2  – Defines eligible payroll costs – of note payroll costs incurred but not paid during the borrower’s last pay cycle of covered period (or alternative covered period) are eligible for forgiveness if paid on or before the next regular payroll date.
  • Pg. 2 – Eligible nonpayroll costs
    • No guidance on any further utilities being eligible – remains the same list as previously
    • Notes that all eligible nonpayroll costs must be paid during the covered period OR incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period.  Big positive – this should largely eliminate need for splitting invoices for things like health insurance since it’s unlikely the monthly invoice aligned perfect to the covered period. 
  • Pg. 3 – Forgiveness ordering of “haircuts” 1) salary/hourly wage reduction, 2) FTE headcount reduction and finally 3) 75%/25% payroll/nonpayroll.  This is different than prior consensus but favorable.
  • Pg. 4 – Notes that payroll for any one individual is capped at $15,385 per individual ($100k / 52 weeks * 8 weeks) – seems to eliminate need to annualize compensation.  Another positive.
  • Pg. 5 – Details line by line items on the forgiveness form – note still not much specific guidance providing on calculating eligible retirement expenses.
  • Pg. 5 & 6 – compensation to owners is listed separately from employee pay.  Instructions to line 9 on pg. 5 note that owners comp capped at $15,385 or the eight-week equivalent of their applicable compensation in 2019, whichever is lower.  I read the intent of this as a limit on bonuses and other compensation to owners if not comparable amounts of bonuses in same time period in prior year.  This could be the biggest negative in the additional guidance.
  • Pg. 7 – FTE defined as 40 hours (not 30 hours as under ACA method previously speculated).   Also provides an optional simplified method to count any employee < 40 hours as 0.5 FTE regardless of hours worked.
    • Other than changing spreadsheets that may have been developed to calculate FTE’s don’t see much impact of move to 40 hour FTE assuming same measurement technique used to measure base FTE’s and covered period FTE’s.
    • The simplified method to calculating part-time employees as 0.5 FTE may become an important planning point for some businesses.
  • Pg. 7 – Details the salary/wage reduction calc and the exception to reduction to complete the PPP schedule A worksheet on pg. 9
  • Pg. 8 – Details the FTE reduction calc and the related safe harbor also to complete the PPP Schedule A worksheet on pg. 9
    • Exceptions expanded to include not just employees who denied attempt to rehire but also those a) fired for cause, b) voluntarily resigned, or c) voluntarily requested and received reduction in hours.     Adjustment made for any of these situations if position was not filled by new employee.
  • Pg. 10 – Provides list of documents that must be submitted with PPP loan forgiveness application and what is required to be maintained, but not submitted.   Based on experiences with the application process it is likely lenders will each have slightly different interpretations on some of these items.   
  • Pg. 11 – optional demographic disclosure form – as mentioned above it is noted that this won’t impact forgiveness if not completed”

Here are some other things that may be important or relevant for you:

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As always, please don’t hesitate to email myself (, Andy Miller (, Christian Miller ( or anyone in our office with questions or comments.  


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