Forgiveness Rules for the Paycheck Protection Program (PPP)

May 27, 2020

On May 21, 2020 Washington Nonprofits presented a webinar on “COVID-19 & Nonprofits: Understanding Forgiveness Rules for the Paycheck Protection Program.” You can access the webinar recording and resources in this post. Keep scrolling for more resources and Payroll Protection Program (PPP) Updates.

Webinar Resources:

Corrections & Notes from the webinar:

1. Future Changes. There will likely be future changes to the application and additional rules issued by the SBA. Hopefully, the new rules will make it easier for borrowers with smaller loans to apply for forgiveness. The attachments are an interpretation of the rules stated in the forgiveness application. There will likely be other interpretations. You should use the spreadsheet as a guide and not as a replacement for doing your own work to prepare your application.  

2. Including Don in the Reference Periods. Don was not included originally in the calculation for the reference periods discussed in the webinar. Don was let go on 4/1/20 but he was employed during the reference periods, so his hours should be included in the 2019 and 2020 Reference Periods.

Updated sections are highlighted in the FTE_Reduction worksheet (see third tab on the spreadsheet).

Here’s a summary of the changes when Don was included in the Reference Periods:

Schedule A:

  • Line 11: change from 2.2 to 2.8
  • Line 13: change from 0.88 to 0.79


Covered Period ends on 7/10/20 not on 7/11/20 (8 weeks includes the day of disbursement).

  • Line 7: change 0.88 to 0.79
  • Line 8: change 39,749.40 to 35,684.10
  • Line 11: change 39,749.40 to 35,684.10

PPP forgiveness is $35,684.10.

3. Use of the Alternative Covered Payroll Period: You can only use the Alternative Period if you pay wages bi-weekly or more. This means if you pay wages on the 1st and 15th, you CANNOT use the Alternative Period.

4. Calculation of Covered Period (or Alternative Covered Payroll Period): The 8 weeks (or 56 days) include the day of disbursement. For purposes of the sample application, the Covered Period ends on 7/10/20 (not 7/11/20).

Payroll Protection Program (PPP) Updates

U.S. Small Business Administration Paycheck Protection Program

What is the new PPP Safe Harbor provision?

When you apply for a PPP loan, you have to certify that you are experiencing financial uncertainty and need the loan. There have been concerns raised that borrowers may face additional scrutiny around need since there have been a few bad actors among larger corporations. What might this mean for nonprofits, who may be facing financial uncertainty but still have some funds in reserves or may have received some supplemental COVID response funds to provide additional services?

Fortunately, SBA issued new guidance on May 13 (FAQ #46) creating the following safe harbor: “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” Most nonprofits borrowed much less and can relax regarding scrutiny of their self-assessment that they need these funds. You still may want to be prepared to state your rationale for certifying that your organization was experiencing financial uncertainty at the time you applied for your loan, in case your banker asks. 

How can I learn more about PPP loan forgiveness?

  • View the recording of our recent webinar on PPP loan forgiveness and related tools (this information is current as of May 21).
  • Visit 501 Commons PPP Loan Forgiveness for additional information on tracking and managing your PPP loan to maximize loan forgiveness. You will find great tools like a PPP Loan Forgiveness Tracker and a PPP Average FTE Calculator. 

Are the PPP rules still changing?

Yes. SBA continues to issue new guidance. In addition, there are a number of proposals in Congress that may change some of the terms of the PPP loans and loan forgiveness (increasing flexibility). However, Congress has not approved changes yet, and they are unlikely to act before the first week of June. We all need to stay tuned to ensure that we have the information we need to convert our loans to grants.

Do you still need a PPP loan for your staffed nonprofit? 

501 Commons’ loan support program is still running and there is still PPP money available. Contact them now at [email protected].

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