SBA Releases Loan Forgiveness Application and Clarifies the Good Faith Certification Requirement under the Paycheck Protection Program

Written by: Natalie Klyashtorny


On Friday, May 15, 2020, the Small Business Administration (SBA) released the application borrowers of a loan under the Paycheck Protection Program (PPP) must use to determine the amount of the loan that may be “forgiven” by their lender.

Only those expenses paid or incurred within the 8-week period after receiving the loan are eligible for forgiveness.  In other words, costs are eligible for forgiveness if they were incurred during the 8-week period but will be paid later or paid during the 8-week period for expenses incurred before the 8-week period. 

A business which obtains a loan under PPP may have some or all the loan forgiven as long as the business continues paying their employees at normal levels or rehires laid-off or furloughed employees during the 8 weeks following the origination of the loan. 

If an offer to rehire an employee is turned down by that employee, the employee will be excluded from the loan forgiveness reduction calculation under PPP.  In order to qualify for the loan, the business must make a good faith, written offer of rehire, and the employee’s rejection of that offer must also be in writing. 

Payroll costs are considered incurred on the day they are earned but are eligible for forgiveness so long as they are paid no later than the next regular payroll date after the 8-week period.  Likewise, salaries paid during the 8-week period that had been earned by employees for previous weeks are eligible for forgiveness.

For non-payroll costs such as mortgage interest, rent and utilities, to qualify for forgiveness, these expenses must either be: (1) paid during the 8-week covered period, or (2) incurred during the 8-week period, and paid by its next regular due date, even if that due date is outside the 8-week period.  Likewise, payments made during the 8-week period are eligible for forgiveness if they were made for periods prior to the 8-week period. 

All loan recipients must certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”  However, for those who received loans of less than $2 million, the SBA is providing a “safe harbor” in that those borrowers will be deemed to have made the required certification that the loan was necessary in good faith, and will not be subject to the same additional scrutiny and an audit from the SBA that borrowers of loan amounts in excess of $2 million will face. 

If you have any question about loan forgiveness under the PPP, please feel free to contact us at contact@nochumson.com and an attorney at Nochumson P.C. will immediately reach out to you to schedule a free consultation.