Loan forgiveness is a key feature of the Paycheck Protection
Program (PPP) administered by the Small Business Administration
(SBA) pursuant to the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act). If PPP loan proceeds are spent in
accordance with the forgiveness rules and guidelines, all or a
substantial portion of the loan amount may be forgiven, effectively
transforming PPP loans into grants. Accordingly, it will be
critical for PPP loan recipients to understand how much of their
loan may be forgiven and how various company actions can impact
that figure. Appropriate planning now can help companies maximize
their loan forgiveness in the future.
This alert reviews the framework underpinning forgiveness
calculations, describes how layoffs and salary reductions can
negatively impact forgiveness and discusses the application process
and documentation required for forgiveness.
