Updated PPP Forgiveness Guidance from the SBA

Please note: This blog is current to the date of its publication, Wednesday, Aug. 5. For additional updates or assistance navigating these uncertain times, please contact us or visit our SST COVID-19 resource page.


On Tuesday, Aug. 4, the Small Business Administration (SBA) released additional PPP loan forgiveness guidance in the form of 23 FAQs with several illustrative examples. This recent update clarifies several previous areas of uncertainty, which are grouped into four categories: General Loan Forgiveness, Payroll Cost Forgiveness, Non-Payroll Cost Forgiveness and Forgiveness Reductions.

While questions still remain regarding the calculation of and application for loan forgiveness, a few highlights from the most recent update include:

  • If a Borrower submits the loan forgiveness application within 10 months of the last day of the Covered Period, the Borrower is not required to make any payments until the SBA submits the forgiveness amount to the Lender.
    • The Lender is responsible for notifying the Borrower of the loan forgiveness amount, if any.
    • If the loan is forgiven, the Borrower is not responsible for any payments. If the loan is not fully forgiven, interest accrues on the non-forgiven portion of the loan beginning on the date of the loan disbursement.
  • Eligible payroll and non-payroll costs incurred before the Covered Period but paid during the Covered Period ARE eligible for loan forgiveness.
    • Payroll costs include all forms of cash compensation paid to employees, including tips, commissions, bonuses and hazard pay.
  • Employer contributions for employee retirement benefits paid or incurred during the Covered Period or Alternative Payroll Covered Period qualify as “payroll costs” eligible for loan forgiveness.
    • However, forgiveness is not provided for employer contributions for retirement benefits accelerated from periods outside the Covered Period or Alternative Covered Period.
  • The amount of owner compensation eligible for loan forgiveness is based on the type of business (C-Corp, S-Corp, self-employed, general partners and LLC owners) and the length of the Covered Period (8 weeks or 24 weeks).
  • If elected, the Alternative Payroll Covered Period applies to eligible payroll costs but NOT eligible non-payroll costs.
    • Eligible non-payroll costs must be paid or incurred during the Covered Period which starts on the date of the loan disbursement.
  • Covered utility payments include electricity supply charges and transportation fees assessed by state and local governments.
  • A Borrower may exclude any reduction in Full-Time Equivalencies (FTEs) if the Borrower is able to document the following in good faith:
    • An inability to rehire individuals who were employees on Feb. 15, 2020
    • An inability to hire similarly qualified individuals for unfilled positions on or before Dec. 31, 2020
  • Borrowers are required to inform the applicable state unemployment office of any employee’s rejected rehire offer within 30 days of the rejection. Borrowers should maintain the following documentation:
    • A written offer to hire an individual
    • A written record of the offer’s rejection
    • A written record of efforts to hire a similarly qualified individual
  • Finally, sole proprietors, independent contractors and self-employed individuals who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the Borrower Application Form automatically qualify to use the Loan Forgiveness Application Form 3508 EZ, or the lender equivalent.

The experts at SST are closely monitoring all COVID-19 related financial updates and are committed to reporting the most accurate, up-to-date information. For more resources, visit our COVID-19 response page or contact us for a personalized look at your organization’s needs.

Thanks to SST Partner Emily Cook for providing the content for this post. Click here to learn more about Emily.