Relief Loans for Businesses > PPP Loan Program  > Loan Forgiveness

PPP Paycheck Protection Program (PPP)

Loan Forgiveness

Below is information regarding PPP loan forgiveness. While some information has been released we are still awaiting more details, especially with the recent passing of the Flexibility Act.

The information presented herein is based on what we know today. Please check back often as the information on this page will be continually updated to reflect the most up-to-date forgiveness information available. 

 


Forgiveness Updates

Additional Resource

Webinar on Forgiveness Application

Access a previously recorded step-by-step training on the loan forgiveness application. The North Dakota SBA District office and SBA Resource Partners explain the factors that determine the loan forgiveness amount and walk through example calculations that are part of the forgiveness application process. It also includes a Q&A session at the end.

Request a Copy
Additional Resource

Frequently Asked Questions About  Forgiveness

Here you will find a list of frequently asked questions about the PPP loan forgiveness. We encourage you to review this as it may address things you have not yet considered. If you are unable to locate an answer to your specific question, you may contact us at pppquestions@bankwithchoice.com

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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 interest on mortgage and other obligations over the 8-week (56-day) covered period from when the loan is disbursed.

The PPP Flexibility Act extends the covered period to the earlier of 24 weeks giving borrowers more time to use their PPP Loan Proceeds. Borrowers that had PPP loans prior to June 5, 2020, may elect to use the 8-week period mentioned above, instead of the 24-week period.

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 24 week (168-day) period (or for loans received before June 5, 2020 at the election of the borrower, the eight-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”).

The PPP Flexibility Act extends the covered period to the earlier of 24 weeks giving borrowers more time to use their PPP Loan Proceeds. Borrowers that had PPP loans prior to June 5, 2020, may elect to use the 8-week period mentioned above, instead of the 24-week period.

See example of the covered period and alternative covered period on page 1 of PPP Forgiveness ApplicationSee example of the covered period and alternative covered period in the Forgiveness Application Instructions.

The Flexibility Act states that 60% of the loan proceeds (SBA previously stated 75%) must be used for payroll. The remaining 40% (previously 25%) can be used on utilities, rent and mortgage obligations that were in effect before February 15, 2020. If 60% 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  the Forgiveness Application to see if this Safe Harbor applies.

The Flexibility Act allows for 2 additional exemptions: if you could not find qualified employees or were unable to restore business operations to February 15, 2020 levels due to COVID-19 related operating restrictions.

Borrowers may have until the earlier of December 31, 2020 and the date the forgiveness application is submitted (previously June 30, 2020) to return FTE levels to where they were on February 15, 2020, to eliminate restrictions in forgiveness.

 

PPP Loan Forgiveness Applications

As of June 17, 2020, the SBA released two PPP Loan Forgiveness Applications. These applications are for reference only. You do not need to complete this application at this time, but may use it to guide your spending during the 8-week (56-day) period or the 24-week (168-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. You will receive additional communication from Choice Bank in the coming weeks with official instructions for submitting forgiveness applications, using an online portal.

Form 3508EZForm 3508
The EZ form may be used by borrowers that can claim at least ONE of these:

  • Are self-employed and have no employees; OR

  • Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR

  • Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.

(see application instructions for full eligibility requirements of the 3508EZ)
 

3508EZ Application

3508EZ Instructions > 



If you are UNABLE to claim at least ONE of the criteria from form 3508EZ, you must use form 3508:

3508 Application

3508 Instructions > 

 

 

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 24-week (168-day) or eight-week (56-day) Covered Period (or Alternative Payroll Covered Period) or 24-week period.  Payroll costs include:

  • Salary, wage, commissions or similar compensations
  • Payment of bonuses and hazard pay
  • 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)
  • Owner-employees and self-employed individuals’ own compensation can be no more than the lesser of 8/52 of 2019 compensation or $15,385 per individual across all businesses.

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. Eligible nonpayroll costs cannot exceed 40% of the total forgiveness amount. Non-payroll Costs Include:

  • Mortgage interest payments, not principal payments.  (may not include prepayment of interest)
  • Interest payments on any other obligations
  • 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 or
  • 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) and
  • 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 full instructions on Forgiveness Application )  consisting of each of the following:

1. Documentation of cash compensation paid to employees during the Reference Period used on the PPP forgiveness Application

  • 3rd party payroll reports or
  • Bank account statements

2. Tax Forms

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

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

NOTE: You only need to provide documentation for what you are requesting forgiveness for.  If 100% of your loan was spent on payroll, nothing other than payroll records need to be submitted.

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

  1. Documentation supporting wage information as shown on PPP Forgiveness Application
  2. Documentation 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:

  • The Forgiveness 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?

If your loan is dated prior to June 5, 2020, you are eligible to apply for loan forgiveness beginning 8 weeks following your loan disbursement. You may also elect to use the 24-week covered period. Loans dated June 5, 2020 or later are eligible to apply for loan forgiveness beginning 24 weeks following 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?

With PPP Flexibility Act, It is expected that the majority of loans will achieve 100% forgiveness of principal and interest.   If your loan is not completely forgiven, the remaining balance, including interest will be repaid in monthly installments to your loan maturity.   Interest begins accruing from the first date of disbursement but is initially deferred.

With the passage of the PPP Flexibility Act, the loan all loans are now deferred to the date that SBA remits the borrower’s loan forgiveness amount to the lender.  (Previously the deferment period was 6 months)   If the borrower does not apply for loan forgiveness they will begin making payments 10 months after the end of the borrower’s loan forgiveness covered period.

Following the deferment period, any portion of the loan that is not forgiven, including interest, will be repaid in monthly installments to the current maturity.

 

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

 

Additional Frequently Asked Questions

Not finding the answer you need? We’ve compiled an extensive list of other questions related to Forgiveness.

View FAQs

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:

pppquestions@bankwithchoice.com              763.398.3060