We’re here to help you figure out what qualifies for loan forgiveness, what you need to apply, and how to submit your application.
Paycheck Protection Program (PPP) loans, created under the CARES Act, allow for potential loan forgiveness on eligible costs incurred during a set 24-week period after a borrower’s PPP funds are disbursed, defined under the CARES Act as the “covered period.”
The SBA has announced that borrowers who received PPP loans of $150,000 or less will benefit from a streamlined forgiveness application and automatic forgiveness.
Borrowers will simply be required to submit a one-page certification that lists:
The record retention guidelines for these smaller loans has been reduced to 4 years for employee records and 3 years for compliance records.
The following costs and expenses are eligible for loan forgiveness under the Paycheck Protection Program. These costs must be paid or incurred during the covered period.
The forgiveness amount may be reduced if you have laid off employees or reduced their salaries.
To determine how much might be forgiven, you can use this calculation:
Your payroll cost multiplied by the average number of full-time employees per month for one of these 8-week periods:
Seasonal employers must use the period from February 15, 2019, through June, 30, 2019.
Reductions in employee salary may also affect your eligible forgiveness amount. A reduction of 25% or more in annual salary (compared to their most recent full quarter) for employees who make less than $100k/year will reduce the loan forgiveness amount.
If you laid off employees or reduced payroll beginning February 15, 2020, you may eliminate the forgiveness reduction as long as you rehire the laid-off employees or restore payroll before applying for forgiveness.
Due to the SBA anticipating a high number of borrowers requesting PPP loan forgiveness, it is anticipated that no more than 40% of the forgiven amount may be for non-payroll costs.
You must apply for PPP loan forgiveness through your lender.
If you’re not approved for loan forgiveness, your lender may request additional documentation. Otherwise, you will be required to repay the loan. The outstanding balance will continue to accrue interest at 1% over the loan term. If you decide to repay early, you can do so without incurring any early payment penalties or fees.
Before you sit down to complete your application for loan forgiveness, you’ll want to compile the following information:
The SBA will require the following documentation as evidence that funds were spent on payroll, mortgage interest payments, rent payments, and utility payments during the 24-week covered period.
The SBA requires the following documentation be provided as evidence that the borrower has met employee retention requirements:
An authorized representative of the business must certify that the documentation provided is true and that the amount forgiven was used according to the program’s guidelines..