‌Apply Now for Paycheck Protection Program (PPP) Loan Forgiveness

 
 

Popular Questions

Can a seasonal employer pay more than the Covered Period cap of either $46,154 for a 24-week period or $15,385 for an 8-week period to a single employee during the Covered Period or Alternative Payroll Covered Period if the annual pay does not exceed $100,000?

No, amounts paid to any one employee during the Covered Period or Alternative Payroll Covered Period exceeding $46,154 for a 24-week period or $15,385 for a 8-week period cannot be included in the forgiveness amount. Compensation requirements of the Paycheck Protection Program also apply to seasonal employers.

Can borrowers return funds they know will be in excess or unforgiven without any penalty?

Yes and the borrower is responsible for accrued interest on the repaid portion of the loan. Any unforgiven portion of the loan may be repaid to the lender at any point in time.

Can employers use 100% of the loan for payroll?

Yes. Current guidance only requires at least 60% of PPP Loan proceeds to be used towards qualifying payroll costs. Borrowers may spend more than 60% of loan proceeds on payroll costs if they choose. However, if less than 60% of the loan proceeds are used on payroll costs, the amount of loan forgiveness will be reduced.

Do independent contractors count as employees for purposes of PPP Loan forgiveness?

No, independent contractors have the ability to apply for a PPP Loan on their own, so they do not count for purposes of a borrower's PPP Loan forgiveness.

Do PPP loans cover paid sick leave?

Yes. PPP loans covers payroll costs, including costs for employee vacation, parental, family, medical, and sick leave. However, the CARES Act excludes qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116–127). Learn more about the Paid Sick Leave Refundable Credit here.

Does the cost of a housing stipend or allowance provided to an employee as part of compensation count toward payroll costs?

Yes. Payroll costs includes all cash compensation paid to employees, subject to the $100,000 annual compensation per employee limitation.

Does the distribution of payroll need to fully align with the 8 week or 24 week period?

An Alternative Payroll Covered Period may be selected by the Borrower to align to their normal payroll cycle. Alternative Payroll Covered Periods begin on the first day of the next payroll period following the date of the loan disbursement. Borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the Covered Period or Alternative Payroll Covered Period. Payroll costs are considered paid on the day that paychecks are distributed or the Borrower originates an ACH credit transaction. Payroll costs are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date. Otherwise, payroll costs must be paid during the Covered Period (or Alternative Payroll Covered Period).

How can I request PPP loan forgiveness?

You will have to request loan forgiveness from your lender and provide documentation to verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days. Final guidance is still pending, but we anticipate that you may need the following documentation to qualify expenses during the 8-week loan period: 1. Copies of payroll tax forms (i.e., 941) 2. Copies of payroll reports for each pay period 3. Documentation reflecting the health insurance premiums paid by the company under a group health plan (including owners) 4. Documentation of all retirement plan funding by the employer 5. Copies of all lease agreements for real estate and tangible personal property along with proof of payment during the 8-week period 6. Copies of all statement of interest paid on debt obligations incurred prior to February 15, 2020 indicating payment amounts and proof of payment for the 8-week period 7. Copies of cancelled checks, statements or other evidence of utilities paid during the 8-week period

How does "Level of Payroll" factor into forgiveness?

This requires additional guidance, but in the original PPP Borrower Information Sheet published by Treasury on March 31, 2020, there is a reference to loan forgiveness being reduced if you decreased salaries and wages by more than 25% for any employee who made less than $100,000 annualized in 2019. Many are still unclear if this determination of wage level is based on an hourly rate basis or a total compensation basis for those paid hourly or otherwise. It is also still a grey area if they plan to compare the wage data on an employee-by-employee basis or company-wide basis, and/or against which periods of time. If it is on an employee basis, this seems fraught as many are likely to have different employees working for them now than they did in any prior period, be it a February - June 2019 rate or prior 12-month period of time.

How is the PPP Loan forgiveness amount calculated?

The loan forgiveness amount is proportionate to the number of employees and wage amounts during the covered 8-week period compared to the same time the previous year (or alternate period for new and seasonal businesses). You may also owe money if you use loan funds for anything other than payroll costs, mortgage interest, rent, and utilities payments during the 8-week loan period. And if the loan amount is more than allowable expenses, that portion will not be forgiven. The following information is from the PPP Borrower Information Sheet published by Treasury on March 31, 2020. We are waiting for clarification and additional guidance on how the following requirements are determined: • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount. • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee who made less than $100,000 annualized in 2019. • Rehiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

How much of my loan will be forgiven?

You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. You will also owe money if you do not maintain your staff and payroll.

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount
     
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
     
  • Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

If a borrower ended up not needing the funds and returns the original loan amount in full, will they be required to pay interest?

Borrowers will be required to pay interest on the loan. Interest begins to accrue the date the funds were disbursed to the borrower.

If a business received EIDL, will this affect the PPP Loan Forgiveness?

The receipt of an EIDL does not impact forgiveness, however any "Emergency Advance" received will be deducted from the loan forgiveness calculation because the EIDL Emergency Advance itself does not require repayment.

If I have an EIDL Loan, how does my PPP Loan affect it?

If your business requested an EIDL advance to support your business needs, the EIDL advance amount is forgivable and will be subtracted from loan amount total. Additionally, current guidance they are able to be refinanced if certain criteria is met from the borrower. The refinancing criteria includes:

EIDL Loan may not be refinanced within a PPP loan when: The PPP Borrower received the EIDL loan before January 31, 2020 or after April 3, 2020.

EIDL Loan is not required to be refinanced with a PPP loan when: The PPP Borrower received funds from an EIDL loan from January 31, 2020 through April 3, 2020; and The PPP Borrower used the EIDL loan for purposes other than payroll costs.

PPP Loan must be used to refinance the full amount of the EIDL loan when: The PPP Borrower received funds from the EIDL loan from January 31, 2020 through April 3, 2020; and The PPP Borrower used the EIDL loan funds to pay payroll costs.

If you received an EIDL advance and are unsure of next steps, please contact your Loan Forgiveness Consultant.

My small business is a seasonal business whose activity increases from April to June. Considering activity from that period would be a more accurate reflection of my business’s operations. However, my small business was not fully ramped up on February 15, 2020. Am I still eligible?

In evaluating a borrower’s eligibility, a lender may consider whether a seasonal borrower was in operation on February 15, 2020 or for an 8-week period between February 15, 2019 and June 30, 2019.

The amount of forgiveness of a PPP loan depends on the borrower’s payroll costs over an eight-week or 24-week period; when does that eight-week or 24-week period begin?

The eight-week or 24-week period starts on the date your lender makes a disbursement of the PPP loan to the borrower. The lender must disburse the loan no later than 10 calendar days from the date of loan approval. The Paycheck Protection Program Flexibility Act of 2020, which became law on June 5, 2020, extended the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan forgiveness. The 24-week period applies to all borrowers, but borrowers that received an SBA loan number before June 5, 2020, have the option to use an eight-week period.

What are the terms of the PPP Loan amount that is not forgiven?

The PPP Loan has a fixed interest rate of 1% and is due in 2 years. All payments are deferred for 6 months, however, interest will accrue over that period. There are no prepayment penalties or fees.

What happens if PPP loan funds are misused?

Per Federal Registry, "If you use PPP funds for unauthorized purposes, SBA will direct you to repay those amounts. If you knowingly use the funds for unauthorized purposes, you will be subject to additional liability such as charges for fraud. If one of your shareholders, members, or partners uses PPP funds for unauthorized purposes, SBA will have recourse against the shareholder, member, or partner for the unauthorized use."

What if an eligible borrower contracts with a third-party payer such as a payroll provider or a Professional Employer Organization (PEO) to process payroll and report payroll taxes?

SBA recognizes that eligible borrowers that use PEOs or similar payroll providers are required under some state registration laws to report wage and other data onthe Employer Identification Number (EIN) of the PEO or other payroll provider. In these cases, payroll documentation provided by the payroll provider that indicates the amount of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s employees will be considered acceptable PPP loan payroll documentation. Relevant information from a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, attached to the PEO’s or other payroll provider’s Form 941, Employer’s Quarterly Federal Tax Return, should be used if it is available; otherwise, the eligible borrower should obtain a statement from the payroll provider documenting the amount of wages and payroll taxes. In addition, employees of the eligible borrower will not be considered employees of the eligible borrower’s payroll provider or PEO.

What is the EZ Application and am I eligible to use it?

The 3508EZ Application Form is a simplified 1-page application with reduced FTE reduction line items, new borrower certifications related to forgiveness amounts (including use of funds, salary, employee reductions, and potential hardships), updated supporting documents to support hardships, employee levels, and salaries.

One of the following provisions must be met by the borrower to qualify for this application:

1) The borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application and did not include any employee salaries within their application.

2) The borrower did not reduce the annual salary or hourly wages of any employee by more that 25% during their covered period compared to January 1, 2020 – March 31, 2020 (or has subsequently returned salaries to the prior level by end of the covered period), and

3) The borrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the covered period (or has subsequently re-hired prior to the end of the covered period). or

4) The borrower was unable to operate between February 15, 2020 and the end of the covered period at the same level of business activity as before February 15, 2020 due to compliance with requirements issued after March 1, 2020.

What is the maturity date of a PPP loan?

If a PPP loan received an SBA loan number on or after June 5, 2020, the loan has a five-year maturity. If a PPP loan received an SBA loan number before June 5, 2020, the loan has a two-year maturity, unless the borrower and lender mutually agree to extend the term of the loan to five years. The promissory note for the PPP loan will state the term of the loan.

What specifically is covered under "Non-Payroll Expenditures"?

Eligible nonpayroll costs eligible for forgiveness consist of: covered mortgage obligations: payments of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property incurred before February 15, 2020 (“business mortgage interest payments”); covered rent obligations: business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020 (“business rent or lease payments”); and covered utility payments: business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020 (“business utility payments”). An eligible nonpayroll cost must be paid during the Covered Period or Alternative Payroll Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period or Alternative Payroll Covered Period. Eligible nonpayroll costs cannot exceed 40% of the total forgiveness amount.

What time period should borrowers use to determine their number of employees and payroll costs to calculate their maximum loan amounts?

In general, borrowers can calculate their aggregate payroll costs using data either from the previous 12 months or from calendar year 2019. For seasonal businesses, the applicant may use average monthly payroll for the period between February 15, 2019, or March 1, 2019, and June 30, 2019. An applicant that was not in business from February 15, 2019 to June 30, 2019 may use the average monthly payroll costs for the period January 1, 2020 through February 29, 2020. Borrowers may use their average employment over the same time periods to determine their number of employees, for the purposes of applying an employee-based size standard. Alternatively, borrowers may elect to use SBA’s usual calculation: the average number of employees per pay period in the 12 completed calendar months prior to the date of the loan application (or the average number of employees for each of the pay periods that the business has been operational, if it has not been operational for 12 months).

When does interest on the loan begin to accrue? Will interest be included in the forgiveness amount?

Interest begins to accrue on the day that the business receives funds from the loan. Accrued interest on the PPP loan forgiveness amount is included in the total forgiveness amount.

Which payroll taxes are included in payroll costs?

Using a "nontraditional" definition of payroll costs per the CARES Act, PPP loan and forgiveness amounts are calculated on a gross basis and exclude FICA (Social Security and Medicare), FUTA, and federal income tax withholding. Specifically, the definition of payroll costs under the CARES Act excludes "taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period" (defined as February 15 - June 30, 2020). Source: Treasury PPP Loan FAQs, Question 16, accessed April 17, 2020 At this time, we think payroll cost calculations for forgiveness will match similar logic as that for loan basis determination; meaning gross wages + State UI + any employer local taxes such as Denver OPT. This statute defines payroll costs in an unprecedented manner, which excludes employer-matching OASDI/Social Security and Medicare taxes, and federal UI (FUTA). Thus, it isn't the total employer tax expense as traditionally defined. We are developing on custom reports to help track this unique definition for our clients.