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Paycheck Protection Loan Forgiveness

If you’re one of the 4,675,868 small businesses in the United States that received a slice of the $515 billion in Paycheck Protection Loans approved by the SBA this spring, you probably have a lot of questions. In fact, that could be the understatement of the year. Guidelines for the loan and what is, and isn’t covered have been confusing to even the most seasoned tax professionals and loan officers at banks.

Small business owners, especially those in Hawaii, certainly do not need any more debt.

The understanding with the PPP loans is that the borrowed amounts will be forgiven, as long as they are spent on approved costs, such as payroll. Recently, additional information was released by the SBA regarding the PPP Loan Forgiveness Application.

On June 22, the SBDC released a 34 page interim final rule (IFR) in consultation with the Treasury, which includes the following changes:

  • Expanding to 24 weeks, from 8 weeks, the covered period during which PPP loan recipients can spend the funds and still qualify for loan forgiveness.
  • Lowering to 60% from 75% the proportion of PPP funding that must be used on payroll costs for full forgiveness.
  • Expanding the terms of new loans to 5 years from 2 years.

In reviewing the new information released, several issues have come to our attention that are important for business owners to be aware of as you apply for PPP Loan Forgiveness. As more information is released, we will continue to update our clients via this blog and through email communications.

As a firm, our aim is to share the most up to date information and analysis with you to help you navigate the PPP Loan Forgiveness process and increase your chances of having the entire loan amount borrowed for your business forgiven.

Use this table of contents to jump ahead to different sections:

Table of Contents

  1. Overview of Issues with PPP Loan Forgiveness
  2. PPP Consulting Engagements – reserve your spot at
  3. Self Help
  4. Further Reading


Brief Overview of Developing Issues

The government signed the PPP Loan Program into law before it had instructions and definitions in place.  This has left all of us with the task of trying to hit a moving target.  Guidance has been released in waves and we have begun to see some problematic issues that may be developing for many businesses who received funds under this program and are intending to apply for forgiveness in any amount.

Here are some items that will cause those problematic issues:

  • Spending on non-allowed uses.
  • Spending on allowable, but non-forgivable uses.
  • Spending at the wrong time.
  • Drops in salaries or hourly rates.
  • Drops in FTE.
  • Spending disproportionately on non-payroll.
  • Fail to prove that you qualify for forgiveness.

The consequences these items can produce include:

  • Reduced loan forgiveness.
  • An additional 5% lender origination fee, normally paid by the SBA, may be added on to the loan amount.
  • Change of loan classification from nonrecourse (you are not personally on the hook) to recourse (you are personally liable for the debt if the business defaults).
  • Additional documentation requests for bank approval (1st tier) can cause an increase from their max decisioning period of 60 days to 120 days.  SBA approval (2nd tier) can take up to 90 days.  This may put you in the repayment period of the loan and cause a cash flow drain.
  • The loan forgiveness may be rejected outright leaving you to an uncertain appeals process.
    • This could have you repaying most of the loan by the time you get an appeals decision depending on how long the process will take.  There will probably be a lot of folks appealing.
  • Audit risks, penalties of perjury, and fraud charges – SBA has 6 years to audit.
    • There is civil and criminal liability with this loan.
    • Imprisonment and fines up to $250k if a breach is bad enough.

We are not sharing this information to scare you. However, it is important that each borrower take a sober look at the requirements of both the loan and its forgiveness; and that you plan appropriately. We have provided links to official guidance at the end of the email for those that are planning on tackling the forgiveness application on their own.


Consulting Engagements

For those that are looking for help, we are offering consulting on these forgiveness applications.  We have limited time to take on these engagements as we have a tax deadline and an office move just around the corner.  These will be formal engagements with a $1000 initial retainer request.  Because of how tight our schedules will be in the coming days, we ask that those clients that will not be engaging us please use the guidance listed under the self-help section rather than email us questions on this matter.

The deliverables from the consulting engagement will be:

  • A meeting to discuss ways to improve the forgiveness variables for your situation.
    • Review of how to strategically manage funds with the time remaining in your applicable period.
    • An analysis of covered period vs alternative payroll covered period in calculating expenditures.
    • Review of the effects in the timing of the forgiveness request.
    • Identification of problematic issues and discussion of potential ways to deal with them.
    • Discussion about the certifications you are required to make under penalty of perjury and mitigation of the associated risks surrounding various uncertainties.
    • Review of interpretations, exceptions, and safe harbors that may be available to increase forgivable amounts.
  • Assistance with documentation process including the compilation of a documentation binder in an electronic bookmarked format for delivery with your application and for your record retention.
  • Assistance with relevant financial calculations.
  • Assistance with the completion of the application.

Please contact us if you wish to engage us in this matter or schedule online at using the PPP Loan Forgiveness Option.


Self Help

For those of you that want to navigate the forgiveness process on your own, here are the links to the official guidance.  Some articles you find on Google may help you to develop context or a working framework, but please be careful when relying on summaries of issues that may be substantially more complex in application:


SBA Form 3508 – This is the application you will be submitting to your bank with the relevant documentation.  This is the most important document to very carefully review.


  • CARES Act PPP statutory provisions (H.R. 748, P.L. 116-136 (03/27/20), Act §§1102, 1106)

This is the original stimulus package, only section 1102 and 1106 apply.


  1. Act §1102 -Paycheck Protection Program (amending Act §7(a) of Small Business Act (15 U.S.C. §636(a))
  2. Act §1106 –PPP Loan Forgiveness (amending Act §7(a) of Small Business Act (15 U.S.C. §636(a))


  • Interim Final Rule –Business Loan Temporary Changes –PPP (04/03/20)


  • PPP Interim Final Rule -Additional Eligibility Criteria (04/14/20)


  • PPP Interim Final Rule -Promissory Notes, Authorizations, Affiliation and Eligibility (04/24/20) (payback by 05/07/20, p. 9)


  • PPP Interim Final Rule issued 6/22/20–IFR–Revisions-to-Loan-Forgiveness-Interim-Final-Rule-and-SBA-Loan-Review-Procedures-Interim-Final-Rule-508.pdf


  • FAQs for Lenders and Borrower (Updated 05/19/20) (Updated almost daily, so keep checking)


  • PPP Affiliation Interim Final Rule (04/03/20) (Excellent 1 ½ page summary of complex SBA affiliation rules) (Best ”forest for trees” read)–ppp-affiliation-interim-final-rule


  • PPP Additional Criterion for Seasonal Employers (04/28/20)


Further Reading for Context