PPP Loan Forgiveness

IF YOU GOOFED AND DO NOT NEED THE PPP FUNDS

    • You have until May 7, 2020 May 14, 2020 May 18, 2020 to return them without question.
    • If your PPP loan is less than $2 million, the SBA will deem you to have met the certification of need requirement.

UPDATES: (Last updated by us - May 20, 2020)

The SBA will continue to update the formal guidance for this loan program. We will try to keep this site updated. You are solely responsible for the accuracy of any information upon which you choose to rely.

FAQ #46 published May 13 stated "Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith."

FAQ #47 published May 13 pushed the safe harbor deadline back to May 18, 2020.

FAQ #48 published May 19 really only deals with banks and lenders - they now have until (1) May 29, 2020, or (2) 10 calendar days after disbursement or cancellation of the PPP loan to file SBA Form 1502.

FORGIVENESS:

If you received a Payroll Protection Program ("PPP") loan you will likely want to apply for loan forgiveness. The following is a brief outline of the parameters applicable to loan forgiveness.

DOCUMENT EVERYTHING:

  • The SBA will be auditing both the spending of PPP funds, and the need for the funds in the first place.

DID YOU REALLY NEED THE FUNDS IN THE FIRST PLACE?

  • To obtain PPP funds, you signed a certification stating "[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant."
    • As of May 13, 2020, the SBA announced that companies whose original PPP loan principal (including affiliate companies) is less than $2 million are deemed to have met the need certification requirements. This does not mean smaller loans will not be audited, but it means there is a presumption that the need for funds was genuine.
    • Who cares? The PPP application lists several criminal statutes you might be violating if you provide false information. (i.e. 18 U.S.C. § 287 (criminal false claims), 18 U.S.C. § 1344 (bank fraud), 18 U.S.C. § 1341 (mail fraud), 18 U.S.C. § 1343 (wire fraud) and 18 U.S.C. § 371 (criminal conspiracy)... to name a few.)
    • We do not take white collar criminal cases, but folks who do have pointed out that last year the DOJ recovered over $3B using the False Claims Act - 31 U.S.C. § 3729 et seq. ("FCA"). The FCA also provides a private right of action by whistleblowers - most likely people within your organization who witnessed actions that may lead to criminal liability.
      • The FCA also includes a "reverse false claims" provision that criminalizes retaining overpayments from the federal government.
  • Questions you'll want to answer and support with evidence:
    • Did you really need PPP funds?
      • If your PPP loan is less than $2M (including to affiliates) the SBA presumes you needed it.
    • Did you have other readily available sources of liquid funding?
      • If your PPP loan is MORE than $2M, the SBA you will want to be very sure you actually needed the funds.
    • Are you really a small business? (Fewer than 500 employees including affiliates.)
    • Did you obtain the correct amount of funds - 2.5 x (total monthly salary, wages, and tips on all pay less than $100,000 per person - employees earning more than $100k still have their first $100k counted.)

STILL NOT SURE?

IF YOU GOOFED AND DO NOT NEED THE PPP FUNDS

    • You have until May 7, 2020 May 14, 2020 to return them without questions.

DO Spend the funds wisely:

Spend the money:

  • Funds must be spent within 8 weeks of funding to qualify for forgiveness.
  • If you aren't able to spend the money within 8 weeks, you can return it. You don't have to return it, you just might not be eligible for forgiveness of the sums you are unable to spend on qualifying expenses.

Spend the money wisely:

  • At least 75% of the funds must be spent on payroll to qualify for forgiveness - things such as:
    • Salary, wages, commissions;
    • Cash tips or equivalent;
    • Vacation, sick, parental/family/medical leave;
    • Retirement contributions, group health insurance premiums; and/or
    • Payroll taxes.
  • No more than 25% of the funds can be spent on non-payroll expenses such as:
    • Rent;
    • Utilities; and/or
    • Interest on mortgages.

DO NOT:

If you are planning to seek loan forgiveness, DO NOT spend PPP funds on the following:

  • Federal payroll taxes, i.e. employer's share of FICA and Railroad Retirement Act taxes;
  • Pay for employees in excess of $100,000;
  • Pay for employees living outside the United States;
  • Other debt;
  • Pay to independent contractors - 1099 workers; and/or
  • Qualified sick leave or family leave which qualify for a credit under sections 7001 or 7003 of the Families First Coronavirus Response Act.