Relief Loans for Businesses > PPP Loan Program  > Loan Forgiveness

PPP Paycheck Protection Program (PPP)

Loan Forgiveness

The Small Business Administration has recently published a PPP Forgiveness Application. They have indicated that forgiveness guidance is forthcoming.  While we await additional information we want to provide what is known today to ensure Choice Bank borrowers are aware of the current requirements.  The information presented herein is based on what we know today.  Please check back often as new information will be posted here as “forgiveness updates” when additional information is available.

What is PPP Loan Forgiveness?

Up to 100% of your Paycheck Protection Program loan is eligible for forgiveness, if you meet requirements set by the Small Business Administration (SBA). The amount of forgiveness you are eligible for is based on the amount of loan proceeds used for payroll costs, utilities, rent, and mortgage interest obligations over the 8-week (56-day) covered period from when the loan is disbursed.

SBA allows for an Alternative covered period for borrowers with a biweekly (or more frequent) payroll schedule.  The alternative covered period allows borrowers to calculate eligible payroll costs using the 8-week (56-day)  period that begins on the first day of their first pay period following their PPP Loan Disbursement Date (the “Alternative Payroll Covered Period”).

See example of the covered period and alternative covered period on page 1 of PPP Application.

SBA rules required loan recipients to use at least 75% of the proceeds for payroll costs. The remaining 25% can be used on utilities, rent and mortgage interest obligations that were in effect before February 15, 2020. If 75% was not used for payroll costs your forgiveness will be reduced.

The total amount forgiven will also be reduced if your full-time employee (FTE) headcount declines or if the salaries and wages that you pay your employees decrease during your covered period (or alternative covered period) versus a reference period selected by borrower.

Allowable Reference Periods are:

  • The average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019;
  • The average number of FTE employees on payroll per month employed by the Borrower between January 1, 2020 and February 29, 2020; or
  • In the case of a seasonal employer, the average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019; between January 1, 2020 and February 29, 2020; or any consecutive twelve-week period between May 1, 2019 and September 15, 2019.

You may be exempt from a FTE Reduction if you tried to hire an employee back, the employee was fired for cause or voluntarily resigned or voluntarily reduced their hours and their position was not filled by a new employee.   See schedule A Worksheet on page 9 of application to see if this Safe Harbor applies.

 

SBA Forgiveness Application

 

Please Note: You don’t need to complete this application at this time but may use it to guide your spending during the 8-week (56-day) period.  Use the application along with the information on this page to show what information will be required to be retained and/or submitted later with your forgiveness application. Later this site will guide you as to how and when to send this information to Choice Bank for forgiveness using an automated process.

 

What Types of Expenditures are Eligible for Forgiveness?

The following are considered eligible expenses under the Paycheck Protection Program:

Payroll Costs

Borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the eight-week (56-day) Covered Period (or Alternative Payroll Covered Period).  Payroll costs include:

  • Salary, wage, commissions or similar compensations
  • Payment of cash tips or equivalent
  • Payment for sick, vacation, parental, family or medical leave
  • Dismissal or separation allowance
  • Payments for group health care benefits, including insurance premiums
  • Payments for retirement benefits
  • Payments of state or local tax on employee compensation, not Federal
  • Annual compensation may not exceed $100,000 for any employee (or $15,385 during the covered period)

Non-Payroll Costs

An eligible nonpayroll cost must be paid during the Covered Period or incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period.
The application does not provide for use of any Alternative Covered Period for non-payroll cost tracking.   Keep track of rent, utilizes and interest using the 56 days after disbursement of the PPP loan amount.  Non-payroll Costs Include:

  • Mortgage interest payments, not principal payments.  (may not include prepayment of interest)
  • Business rent and lease payments on business property
  • Utility payments for services such as electricity, gas, water, transportation, telephone or internet access.
  • The mortgages and services must have been in place before February 15, 2020.

What Documentation Will I Need to Provide to be Approved for Forgiveness?

Similar to the PPP application process, your forgiveness application must be accompanied by supporting documentation for the eligible expenditures. The requirements are below and on  Page 10 of the Forgiveness Application:
Required to be submitted with Forgiveness Application:

Payroll Costs

Payroll Records for the 8-week (56-day) Covered Period or the Alternative Covered Period consisting of each of the following: 

1. Documentation of cash compensation paid to employees

  • 3rd party payroll reports
  • Bank account statements

2. Tax Forms  (or equivalent 3rd party reports) – for covered period or alternative covered periods that overlap the covered / Alternative covered periods

  • Payroll tax filings (941)
  • State wage reporting and unemployment

3. Payment receipts, canceled checks or account statement showing employer contribution to health insurance and retirement plans

 

Payroll Records for the Full-Time Equivalent (FTE) for the reference period you will use (see instruction on page 5 line 11)  consisting of each of the following

1. Documentation of cash compensation paid to employees

  • 3rd party payroll reports
  • Bank account statements

2. Tax Forms

  • Payroll tax filings (941)
  • State wage reporting and unemployment

3. Payment receipts, canceled checks or account statement showing employer contribution to health insurance and retirement plans

Non-Payroll Costs

1. Documentation verifying payments on covered mortgage obligations may be one of the following:

  • Copy of lender amortization schedule and receipts
  • Canceled checks verifying eligible interest payments
  • Lender account statement from February 2020 and the months of the covered period through one month after the end of the covered period

2. Documentation verifying payments on covered lease (or rent) obligation may be one of the following:

  • Copy of current lease agreement and receipts or canceled checks verifying eligible payments from the Covered Period;
  • Lessor account statement from February 2020 and from the covered period through one month after the end of the covered period

3. Documentation of Covered Utility payments may be one of the following,

  • Copy of invoices from February 2020
  • Copy of invoices paid during the Covered Period
  • Receipts
  • Canceled checks
  • Account statements verifying those eligible payments

Documents that Each Borrower Must Retain for 6 years but is Not Required to Submit

  1. Documentation supporting wage information as shown on page 10 of PPP Forgiveness Application
  2. Documentaton of FTE Safe Harbor Reduction
  3. Records supporting borrowers certifications for the necessity of the PPP loan request and eligibility for PPP loan.

Borrowers Certifications that must be made:

  • Page 4 of the application has borrower’s certifications that must be made
  • Please review now so you can be ready to make the certifications when requested.

 

When and How Can I Apply for Forgiveness?

You are eligible to apply for loan forgiveness beginning 8 weeks following your loan disbursement. You will provide supporting documentation to Choice Bank and we will submit it to the SBA on your behalf.  This site will be updated to instruct you on how you will submit this information.

 



 

What if my Loan is not Completely Forgiven?

If your loan is not completely forgiven, the remaining balance, including interest will be repaid in 18 installments. All PPP loans have a 24-month term; interest begins accruing from the first date of disbursement but is deferred for the first 6 months.  Following the 6-month deferral, any portion of the loan that is not forgiven, including interest, will be repaid in 18 installments. Monthly payments will be made to Choice Bank as you would with a traditional loan.

 

Choice Bank cannot provide legal, tax or accounting advice. Please consult your own legal and accounting advisors as needed.

Contact

We are here to help! If you have questions regarding the Paycheck Protection Program or other SBA Programs that might be available to you, contact us at:

ppp@bankwithchoice.com              763.398.3060