PPP Loan Forgiveness Resource Center

Resources for PPP Borrowers


If you’ve received a Paycheck Protection Program (PPP) loan, your business must meet specific requirements to ensure forgiveness. This Resource Center contains helpful insights and recommendations for businesses navigating the PPP process and looking for assistance in maximizing forgiveness. Please check back frequently for up-to-date information.

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FAQ: PPP Loan Forgiveness

The CARES Act, as amended by the Tax Certainty and Disaster Tax Relief Act of 2020 (Relief Act), allows recipients of PPP loans to also claim the ERC for qualified wages as long as the same expenses are not used for both benefits. IRS Notice 2021-20 provides guidance for employers claiming the ERC and indicates that an eligible employer generally makes the election to use payroll costs for PPP loan forgiveness by not claiming the ERC for those qualified wages on its federal employment tax return.

ERC qualified wages are limited to $10,000 for calendar year 2020 and $10,000 for each of Q1 and Q2 of 2021. NOTE: the American Rescue Plan Act, signed into law on March 11, 2021, extends the ERC through December 31, 2021.

Borrowers who have already received PPP loan forgiveness do not have the same planning opportunities that are available to borrowers who have not yet filed the loan forgiveness application. To understand how best to proceed with claiming ERC credits alongside your PPP loan forgiveness, please connect with MFA’s PPP Advisory Team.

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Generally, gross receipts for purposes of second draw PPP loan eligibility are defined as all revenue received or accrued by the borrower and its affiliates from all sources. This includes revenue from the sale of products or services, interest, dividends, rents, royalties, fees or commissions, reduced by returns and allowances but excluding net capital gains and losses. Importantly, gross receipts do not include forgiven PPP loan proceeds or economic injury disaster loan (EIDL) advances. Guidance released by the SBA provides a shortcut to calculating gross receipts based on the relevant lines of the tax return.

To be eligible to receive a second draw PPP Loan, the borrower must demonstrate at least a 25% decline in either:

  • Gross receipts in any calendar quarter of 2020 compared to the same quarter of 2019, or
  • Annual gross receipts in 2020 compared to annual gross receipts in 2019.

For entities that were not in business during all of 2019, the decline in gross receipts can be demonstrated starting with the first quarter in which business began if it was before February 15, 2020. For example, applicants that were not in business until the fourth quarter of 2019 should compare the fourth quarter of 2019 to each calendar quarter of 2020 when measuring the decline in gross receipts.

If the requested second draw PPP loan amount is greater than $150,000, the applicant must provide documentation supporting the decline in gross receipts with the loan application. For loan amounts of less than $150,000, SBA allows the documentation to be provided no later than the time the loan forgiveness application is submitted to the lender. Supporting documentation includes quarterly financial statements or quarterly or monthly bank statements. If relying on annual gross receipts, the 2019 and 2020 annual tax filings are required. If the 2020 annual tax filing is not yet available, SBA recommends submitting a mock 2020 return with signatures attesting that the values entered will be the same values included on the filed return.

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Notably, unlike with the first draw, second draw eligibility rules specify that an employer have no more than 300 employees.

When counting the number of employees, all employees of the borrower and its affiliates (both U.S. and foreign) must be included, unless the borrower satisfies the alternative criteria for businesses with a NAICS code beginning with 72 or qualifying news organizations. Special rules also apply to franchisees.

This is not a full-time equivalent determination. One person equals one employee, regardless of the hours worked.

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Borrowers that, together with their affiliates, received $2 million or more in PPP loans are required to complete one of two loan necessity questionnaires, depending on whether the borrower is for-profit (Form 3509) or nonprofit (Form 3510). The information that the borrower provides on either form will be used by SBA to assess the borrower’s certification made at the time of the loan application that the economic uncertainty makes the PPP loan necessary to support the borrower’s ongoing operations.

In its PPP Frequently Asked Questions (specifically, FAQ number 53), SBA provides that the borrower’s receipt of the loan necessity questionnaire does not mean that SBA is challenging the economic uncertainty certification, but rather SBA’s assessment of the certification will be based on the totality of the borrower’s circumstances.

The loan necessity questionnaire makes inquiries that are specific and unique to each borrower to assist SBA in assessing the economic uncertainty certification. The inquiries are centered around two main assessments of the borrower:

  1. a business/nonprofit activity assessment, and
  2. a liquidity assessment.

The responses to the questions should be based on the borrower’s specific facts and circumstances, and generally these responses do not lend themselves to a standard or canned response. A borrower should make sure that each question is addressed, and if the question is not applicable, the borrower should state this on the questionnaire.

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There is no specific guidance in U.S. GAAP related to accounting for government assistance by business/for-profit entities. To determine the relevant accounting treatment, entities should analyze the nature and form of the assistance, the conditions required to be met and any relevant principles previously used for similar transactions.

Loan model (ASC 470)
As PPP loans are considered legal-form debt, it is appropriate to account for them as such under ASC 470, Debt. Under this model, the liability would only be derecognized upon (a) repayment to the creditor or (b) legal release under ASC 405-20, Extinguishments of Liabilities. In this context, some entities may repay the PPP loan at the end of two (or five) years upon maturity, or earlier because they have reconsidered their eligibility. In those cases, debt accounting must be applied.

Entities that intend to apply for debt forgiveness should still account for the PPP loan as debt pursuant to the guidance in ASC 470. However, legal release would only occur upon confirmation of forgiveness from SBA.

Borrowers intending to or that have already applied for forgiveness should not derecognize the PPP loan liability until they have received the confirmation of forgiveness from SBA.

Grant Model (IAS 20)
Alternatively, it may be acceptable to account for PPP loans by analogy to IAS 20, Accounting for Government Grants and Disclosure of Government Assistance.

Under an analogy to IAS 20, a deferred income liability would be recognized upon receipt of the forgivable loan if, at the time of receiving the loan, the entity meets the eligibility requirements and has determined it is probable they will meet the conditions for forgiveness, i.e., the loan will be used to pay for qualifying salaries, rent, mortgage interest and utilities. No interest would be accrued due to the expectation of forgiveness.

The deferred income liability would be derecognized on a systematic basis over the periods in which the entity incurs the related expenses (e.g., payroll). That is, the deferred income would be recognized in the income statement as qualified expenses are paid and presented as either (1) other income or (2) a reduction of the related expenses (presentation as revenue is not appropriate).

This approach will result in the recognition of the proceeds as a grant for the amount expected to be forgiven prior to legal release; the remainder (if any) would be recognized as a loan consistent with ASC 470 and derecognized upon repayment or legal release in accordance with ASC 405-20.

Nonprofit entities
ASC 958-605, Not-for-Profit Entities—Revenue Recognition applies to government grants received by nonprofit entities. Therefore, no analogy to IAS 20 would be made by nonprofit entities.

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All reporting entities should disclose the applicable accounting policy for PPP and, if applicable, its treatment as forgiven, in the footnotes and where the loan amounts are presented in the financial statements.

In addition, SEC registrants should provide appropriate disclosures throughout their filings. Specifically, a risk factor may be appropriate to address eligibility considerations for the PPP loans as well as uncertainties about forgiveness. MD&A liquidity disclosures should discuss the borrower’s intent and ability to repay the loan. When a registrant’s operations are only viable due to the receipt of the PPP loan, that fact should also be disclosed.

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On October 2, the SBA issued a Procedural Notice to address required procedures for changes of ownership related to borrowers that have received a PPP loan. The SBA notice defines a change of ownership as meeting at least one of the following conditions:

  1. At least 20% of the common stock or other ownership interest of a PPP borrower (including a publicly traded entity) is sold or otherwise transferred, whether in one or more transactions, including to an affiliate or an existing owner of the entity;
  2. The PPP borrower sells or otherwise transfers at least 50% of its assets (measured by fair market value), whether in one or more transactions; or
  3. A PPP borrower is merged with or into another entity.

In all of the above scenarios, the PPP borrower is responsible for the performance of all loan obligations, all related certifications in connection with the loan (including certification of economic necessity), preparing and retaining required PPP forms and supporting documentation as well as providing said documentation to the lender and SBA as needed, and compliance with all other PPP requirements.

PPP borrowers must notify lenders of a change of ownership in writing prior to a transaction closing and provide the lender with proposed agreements and/or other documentation related to the transaction.

Additionally, the SBA has developed different procedures depending on whether the PPP loan has been satisfied or not:

  • There are no restrictions on a change of ownership if the PPP loan has been paid back in full or has been fully forgiven prior to closing a sale or transfer.
  • If the loan has not been satisfied, SBA approval is NOT required if:
    • The transaction is a stock sale/transfer of less than 50% OR the borrower completes a forgiveness application and sets funds equal to the loan amount in escrow
    • The transaction is an asset sale AND the PPP borrower completes a forgiveness application and sets funds equal to the loan amount in escrow.

For complete details on change in ownership procedures, please refer to the SBA’s Procedural Notice in its entirety.

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How We Can Help

Through our PPP Loan Advisory Services, we make it a priority to deliver the care and attention-to-detail necessary to provide you with the confidence that MFA is fully supporting you in bringing your loan forgiveness application to conclusion.

How MFA’s dedicated PPP Advisory Team can help:

  • PPP Forgiveness Calculation
    • Draft your business’ PPP loan forgiveness calculation(s), in accordance with the CARES Act and other relevant industry guidance
    • Create and deliver a dynamic PPP loan forgiveness analysis
    • Compile reconciling calculations, loan forgiveness analysis and relevant third-party documentation in an ‘Electronic Binder’ to submit to your lender and, if necessary, the SBA
  • Documentation Supporting Necessity of PPP Loan Request
    • Assist with the memorialization of the primary financial and non-financial impacts to your business that have created economic uncertainty due to COVID-19

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Our PPP Forgiveness Engagement Process

When we engage with a customer to support them during the PPP loan forgiveness process, we set out with three primary goals: to help borrowers 1) accurately provide the appropriate information to lenders/the SBA, 2) avoid unnecessary delays and/or follow-up requests for supplementary information and 3) maximize forgiveness.

PPP Forgiveness Engagement Process

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MFA's PPP Advisory Team


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