May 19, 2020

The U.S. Small Business Administration (SBA) released an application form Friday for Paycheck Protection Program (PPP) loan forgiveness along with instructions for borrowers to complete the form. The PPP Loan Forgiveness Application and instructions expand on FAQs and interim final rules issued by the SBA over the past few weeks in conjunction with the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The SBA’s instructions are intended to reduce compliance burdens and simplify the process for borrowers and lenders. Some highlights from the form include:

Alternative Payroll Covered Period: Under initial guidance, the eight-week covered period for PPP loan usage began on the date of the first PPP loan disbursement. There is now an option for borrowers with bi-weekly or more frequent payroll cycles to utilize an alternative payroll covered period, which begins on the first day of the first pay period following the first PPP loan disbursement.

Eligible Payroll and Non-Payroll Costs: The application instructions clarify the forgiveness eligibility of qualifying costs as those paid and incurred during the covered eight-week period.

FTE Reduction Exceptions: PPP loan forgiveness is reduced if a borrower’s average weekly number of FTE employees during the covered eight-week period is less than a prior baseline period. The instructions now include FTE reduction exceptions, which removes the impact of headcount lowered due to 1) positions for which the borrower made a good faith, written offer to rehire an employee that was rejected by the employee; 2) employees terminated for cause; 3) employees who voluntarily resigned or requested and received a reduction to their hours. Any FTE reductions in these cases do not reduce the borrower’s loan forgiveness.

FTE Calculation: For purposes of calculating FTEs, borrowers can use a simplified method of 1 FTE for each employee working 40 hours or more per week, and .5 FTE for each employee who works fewer than 40 hours.


The newly released application addresses many technical questions surrounding PPP loan forgiveness calculations, but a number of unresolved issues remain. Stay tuned for an upcoming GRF webinar regarding PPP loan forgiveness including answers to commonly asked questions. You can find more information on the PPP loan program on GRF’s COVID-19 Response resource page.

Contact your CPA or send an email to with questions about this alert.