By Stephanie Mercado

The Small Business Administration (SBA) has released new guidance on its Paycheck Protection Program (PPP) through an updated FAQ addressing 23 questions related to loan forgiveness. The new FAQs come as lawmakers negotiate a new COVID-19 relief package, which is expected to simplify PPP loan forgiveness and create a new round of PPP loans. (The deadline for the current round of PPP loan applications is Saturday, Aug. 8, 2020.) A summary of the key questions addressed are as follows:

General Loan Forgiveness

  • Sole proprietors, independent contractors and self-employed individuals automatically qualify to use Loan Forgiveness Application Form 3508EZ (or lender equivalent of the same); and
  • Provided the borrower timely submits a loan forgiveness application, they will not be required to make any payments until the SBA remits the forgiveness amount to the lender. Should the full amount be forgiven, no interest is due.

Payroll Loan Forgiveness

  • Payroll costs paid OR incurred in either the eight-week or 24-week period can be forgiven
  • Gross cash compensation should be used instead of net
  • Payroll costs include all forms of compensation including tips, commissions, bonuses and hazard pay; however, this total gross payroll approach is limited to $100,000 per employee annualized
  • Employer expenses for employee health care plans incurred or paid in either the eight-week or 24-week period can be considered part of payroll costs eligible for forgiveness; additional guidance is provided for insured group health plans
  • Employer contributions to employees’ retirement benefit plans either incurred or paid in the eight-week or 24-week period can be considered part of payroll costs eligible for forgiveness, provided that no accelerated, out of the ordinary course of business payments occurred
  • Additional guidance is provided for payroll forgiveness for owner employees related to C Corps, S Corps, self-employed, LLCs and general partners

Non-payroll Loan Forgiveness

  • Eligible non-payroll expenses such as business mortgage interest costs, eligible business rent or lease costs and eligible business utility costs are eligible for forgiveness, provided they were either incurred or paid within the eight-week or 24-week period
  • Only interest on business mortgages, auto loans or other forms of secured credit are eligible for loan forgiveness; interest from unsecured loans is not eligible for forgiveness
  • Lease renewals and interest on refinanced mortgages are eligible for forgiveness
  • Both electric supply and distribution costs are eligible for forgiveness

Reduction to Loan Forgiveness

Borrowers can exclude any reduction in FTEs from the loan forgiveness amount if the borrower can demonstrate in good faith:

  1. An inability to rehire individuals who were employees of the borrower on Feb. 15, 2020; and
  2. An inability to hire similarly qualified individuals for unfilled positions on or before Dec. 31, 2020.
  • To meet this requirement, borrowers must also notify the state unemployment insurance office of the employee’s rejected rehire offer within 30 days of receiving the rejection
  • Additional guidance is provided relating to seasonal employees and reduction of salaries or wages by more than 25%

For more information on PPP Loans or the updated FAQ, contact Stephanie Mercado at or 216.736.7272.