SBA Offers Gyms Safe Harbors for Loan Forgiveness

    What the Small Business Administration’s safe harbor legal provisions entail and how these new requirements can help your fitness facility’s loan forgiveness application.


    9/22/21 UPDATE: It has come to IHRSA’s attention that some lenders are informing applicants that these safe harbors are insufficiently clear. IHRSA is seeking further clarification from the SBA at this time.



    If you were one of the gyms, health clubs, or studios fortunate enough to receive a Payroll Protection Program (PPP) loan in the first round of PPP back in the spring of 2020, you are probably getting ready to file your application for loan forgiveness. If you, like many other gyms, clubs, and studios, particularly those in California, New Jersey, New York, North Carolina, Oregon, and Washington, were closed by state mandate or operating under severe capacity restrictions during the period of this PPP loan, you may be concerned about meeting the requirement that 60% of your loan be spent on payroll to qualify for full forgiveness.

    Paycheck Protection Program (PPP) Loan Forgiveness Solutions

    IHRSA has been working with operators facing this challenge for months, seeking to clarify the requirements around forgiveness. We are pleased to report two potential solutions for operators who find themselves struggling to meet the requirements for full forgiveness of their PPP loans.

    The Small Business Administration (SBA) has provided two “safe harbors” for businesses that could not meet the 60% spent on payroll requirement. What is a “safe harbor”? A safe harbor is a legal provision that allows you to sidestep or eliminate legal liability in certain situations, provided that certain conditions are met. In this case, the safe harbors are a set of requirements, that if you fit into, you will be excused from the 60% spent on payroll requirement for loan forgiveness.

    SBA Offers Gyms Safe Harbors for Loan Forgiveness Column Width Listing Image

    Safe Harbor Protection Based on Level of Business Activity

    The first and most flexible safe harbor protects from reductions in forgiveness if the business was unable to return to the same level of business activity prior to February 15, 2020, due to compliance with requirements/guidance from the:

    • Secretary of Health and Human Services,

    • Director of the Centers of Disease Control and Prevention, or

    • Occupational Safety and Health Administration between March 1, 2020, and December 31, 2020.

    SBA released an Interim Final Rule, further clarifying this safe harbor. The SBA rule declares that borrowers that can certify that they have documented in good faith that their reduction in business activity during the covered period stems directly or indirectly from compliance with COVID Requirements or guidelines are exempt from any reduction in their forgiveness amount resulting from a reduction in FTE employees during the covered period.

    Further, SBA is interpreting this safe harbor to include COVID-related shutdowns and restrictions issued by state and local governments, as these were based in part on guidance from the three federal agencies. The documentation required to claim this exemption includes copies of applicable COVID Requirements or Guidance for each business location and relevant borrower financial records.

    Safe Harbor Protection Based on Employee Levels

    The second safe harbor recognizes that some businesses were slower to reopen, and protects from forgiveness reduction if the business was able to restore its employee levels to their February 15, 2020, levels by December 31, 2020.

    Navigating the PPP forgiveness process can be challenging and confusing. If you are at all concerned that you might not qualify for full forgiveness due to the payroll requirement, look at these safe harbors, if you were operating under any state or local restrictions during the term of your PPP loan, you should be able to qualify for forgiveness.

    Do not assume that your banker knows about the safe harbors or all of the PPP rules, there have been many changes made to the PPP program over the past year and the entire process around PPP loans and forgiveness is new for everyone. PPP was intended to help you. While the program is far from perfect, understanding these rules for forgiveness can ensure that PPP remains a benefit and not a burden.

    Author avatar

    Jeff Perkins @JeffD_Perkins

    Jeff Perkins is the Assistant Vice President of Government Relations for IHRSA. He's responsible for monitoring and influencing legislation at the state and federal level to protect club business models and operations, and help promote the health benefits of exercise. Jeff enjoys running, soccer, ice hockey, and ice cream, not in that order.