Business Reminded to Apply for PPP Forgiveness

THURSDAY, MAY 20, 2021

With the second round of the Paycheck Protection Program coming to an end on May 31, various reports are reminding small business borrowers to apply for loan forgiveness, although PPP forgiveness is not a guarantee.

Since being launched last spring to keep businesses afloat in wake of the COVID-19 pandemic, the Small Business Administration has disbursed $780 billion, including more than $13 billion to U.S. contractors and construction firms, ranging between less than $50,000 to $5 million.

Applying for Forgiveness

Whether a business is applying for either the PPP Draw 1, PPP Draw 2 or both loans, the terms of the loan(s) are relatively the same, requiring that eligible borrowers who qualify for full loan forgiveness should have carried out the following over the eight- to 24-week period upon receiving the loan:

  • Maintained employee staffing and compensation levels (in PPP Draw 2, having maintained the compensation levels the same as in PPP Draw 1);
  • Spent the loan proceeds on payroll costs and other eligible expenses (40%); and
  • Used at least 60% of the loan for covering payroll costs.

Although should a business fall short of this guideline, partial forgiveness could be an option.

It is important to note that while payroll includes salaries and wages, as well as money for paid vacations, sick leave and other benefits, the PPP reimbursement salaries cap at $100,000. All employees regardless of salary above 100,000 are eligible to be counted in PPP loan forgiveness. However, anything above the $100,000 threshold his not covered.

Additionally, contractors and other 1099 workers do not count toward the payroll of a business, as they could have applied for PPP independently.

After all the loan money is spent, borrowers can apply for forgiveness any time up to the maturity date of the loan. However, if borrowers fail to apply for forgiveness within 10 months after the last day of the covered period, then forgiveness for the loan is revoked and borrowers will have to begin making loan repayments to their lender.

To simply the process of applying, the American Institute of Certified Public Accountants has created a free online platform, Once the form has been completed, the lender has 60 days to review the application and submit it to the SBA, which has 90 days to make a decision regarding forgiveness.

Eligible businesses for PPP loan forgiveness include:

  • Self-employed individuals, independent contractors, and sole proprietors;
  • Small businesses with employee count of 500 or fewer;
  • Non-profits – 501(c)(3) and 501(c)(19) with 500 or fewer employees; and
  • Franchises on a location by location basis.

If a business’s request for forgiveness is rejected, Ken Logsdon, partner at law firm Dorsey & Whitney who recently presented and sponsored a webinar on the PPP forgiveness process, noted that those companies should be ready to contest the decision. This can be done by filing an appeal petition with the SBA’s Office of Hearings and Appeals within 30 calendar days of the rejection.

Companies filing for petition should include, among other elements:

  • A copy of the SBA loan review decision;
  • A full and specific statement as to why the SBA loan decision was alleged to be erroneous;
  • The relief sought; and
  • The name, contact information and signature of the appellant or attorney.

From there, Logsdon reported that an administrative law judge would be tasked with deciding whether the SBA loan review decision was based on clear error of fact or law within 45 calendar days. The decision is essentially final and enforceable 30 days after the decision it is rendered.

Regarding this process, other attorneys have stated that businesses should be aware that SBA audit reviews are mandatory for borrowers who received more than $2 million but could also been conducted on businesses who received less than that amount.

Since the program was established, the U.S. Department of Justice has convicted dozens of companies for PPP fraud. In December of last year, information regarding more than 5 million loans were released in response to a Freedom of Information Act request and lawsuit, citing that more than half the money provided through the PPP program for small businesses went to just 5% of the recipients.

Previously, the SBA issued new PPP guidance in March regarding revisions made to the PPP that intended to make access to the PPP loans more equitable. The final rule arrived after President Joe Biden announced that his administration would be giving businesses with fewer than 20 employees and sole proprietors exclusive access to the portal from Feb. 24 through March 9.

In February, the Internal Revenue Service announced that companies denied forgiveness of the of their Small Business Interruption Loan under the PPP would be eligible for an employee retention tax credit.

The new policy reflects a change that was part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which passed in December. Prior to the change, companies couldn't accept credit if they also took a PPP loan. Now, as long as the loan doesn't qualify for forgiveness, firms can apply for the credit.

Industry Response

Despite ongoing updates and directives regarding applying for PPP forgiveness, the Associated General Contractors of America recently filed a Freedom of Information Act request against the SBA to disclose more information about how its fielding PPP forgiveness applications of $2 million or more.

According to the AGC, the process is taking up to eight months.

“The process continues to be very opaque,” said Michael Kennedy, AGC's general counsel. “As time has gone by and the delay has increased, we've become increasingly concerned about what those standards and procedures may be.”

While forgiveness applications for businesses who received loans below the $2 million threshold are only taking weeks, businesses with larger loans are having a much longer response time.

“It's been a hidden secret as to what exactly they're looking at from a metrics or supporting information perspective,” said James Miller, a partner in the construction practice at accountancy Marcum LLP. Miller added that while he can’t say the same for everyone, in his experience, only one of hundreds of clients has successfully gotten their application through the process and was reported to be approved.

Not the first time the AGC confronted the SBA, in December of last year the association filed lawsuit against them, along with the Office of Management and Budget, to block a questionnaire that was being used to reassess whether companies were eligible for Paycheck Protection Program loans.

In addition to suggesting that the questionnaire was unlawful to begin with, the AGC also asked for the courts to restrict the use of the information that the questionnaire generates until the SBA makes it available to the public and publishes revisions.

The suit was filed Dec. 8 in the United States District Court for the District of Columbia.

Earlier that year, in April, the U.S. Treasury Department released a clarification on the program just days after AGC wrote a letter noting that the loan guidance had appeared to exclude many construction firms.

The Administration released an interim final rule on April 2 for the PPP, that stated that to qualify, businesses must have 500 or fewer employees and fall below the agency’s small business size standards to qualify.

The standard in question revolves around small size standards (as defined in section 3 of the Small Business Act, 15 U.S.C. 632). For construction businesses, this is generally determined by an average annual income threshold, not a number of employees threshold.

The AGC responded with the initial guidelines on April 5, with Stephen E. Sandherr, the association’s Chief Executive Officer saying at the time:

“This error appears to severely undermine the purpose of the new loan program by endangering the survival of many construction firms—the vast majority of which are family-owned businesses—that Congress intended to qualify for the program. As a result, tens of thousands of construction professionals will be forced to suffer new economic hardships because agency officials are misstating the law and subsequent eligibility guidance from the U.S. Department of the Treasury.”

On April 8, the Treasury issued a clarification in the form of a Q&A. The items listed included:

  • Question: Does my business have to qualify as a small business concern (as defined in section 3 of the Small Business Act, 15 U.S.C. 632) in order to participate in the PPP?
  • Answer: No. In addition to small business concerns, a business is eligible for a PPP loan if the business has 500 or fewer employees whose principal place of residence is in the United States, or the business meets the SBA employee-based size standards for the industry in which it operates (if applicable).

Tagged categories: Business management; Business matters; Business operations; COVID-19; Finance; Funding; Government; NA; North America; Program/Project Management; Project Management; Small Business Administration; Taxes

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