SBA Paycheck Protection Program (PPP)- Forgiveness Phase

The SBA will publish additional guidance on loan forgiveness and we will update this page as guidance is issued. Disclaimer: The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time.  Any and all details offered are preliminary and are therefore subject to change at any time.  This has been prepared for general information purposes only and does not consider the specific objectives, the financial situation, or, the particular needs of any individual or company.   This information is, by its very nature, incomplete and specifically lacks information critical to making final decisions, and, is dependent on the occurrence of future events which cannot be assured.  It is recommended you seek the advice of a competent professional. For additional information visit the SBA FAQ for Lenders and Borrowers.

Loan Forgiveness

After disbursement of the loan, a borrower is eligible for loan forgiveness on up to eight weeks of covered expenses. 75% of funds used during the loan forgiveness period should be used for payroll-related costs. A borrower will apply to a lender by submitting all the relevant paperwork, at which time a lender will have up to sixty days to approve or deny the application. Importantly, lenders can rely on borrower documentation for loan forgiveness. If the loan forgiveness application is approved, that portion of a borrower’s loan is forgiven, and SBA will pay the lender the part of the principal amount plus interest.

SBA also has a pre-purchase option that allows a lender to submit the expected amount of funds spent after seven weeks from the date of the loan’s disbursement. SBA will then purchase the expected forgiveness amount within fifteen days.

SBA has further indicated that they will issue additional guidance related to the loan forgiveness process.

Safe Harbor Deadline extended

SBA and Treasury have updated the FAQ at in regards to the safe harbor deadline which has been extended to May 14, 2020. In part, the SBA notes: “All borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that “[current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.  Lenders may rely on a borrower’s certification regarding the necessity of the loan request. Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 (SBA is extending the repayment date for this safe harbor to May 14, 2020) will be deemed by SBA to have made the required certification in good faith.

How can PPP loans be used?

  • Payroll costs, including:
    1. Compensation to employees in the form of salary, wages, commissions, or similar compensation;
    2. Cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips);
    3. Payment for vacation, parental, family, medical, or sick leave
    4. Allowance for separation or dismissal;
    5. Payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement;
    6. Payment of State and Local taxes assessed on compensation of employees; and
    7. For an independent contractor or sole proprietor, wages, commissions, income, or net earnings from self-employment, or similar compensation.
  • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
  • Mortgage interest payments (but NOT mortgage prepayments or principal payments);
  • Rent payments;
  • Utility Payments;
  • Interest payments on any other debt obligations that were incurred before February 15, 2020; and/or
  • Refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020. If you receved an SBA EIDL loan during this period you can apply for a PPP loan. If your EIDL loan was not used for payroll costs, it does not affect your eligibility for a PPP loan. If your EIDL loan was used for payroll costs, your PPP loan must be used to refinance your EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan.

How much of the PPP loan proceeds should be used for payroll costs?

At least 75 percent of the PPP loan proceeds shall be used for payroll costs.  For purposes of determining the percentage of use of proceeds for payroll costs, the amount of any EIDL refinanced will be included.  For purposes of loan forgiveness, however, the borrower will have to document the proceeds used for payroll costs in order to determine the amount of forgiveness.

Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities.  As explained above, not more than 25 percent of the forgiven amount may be for non-payroll costs.

What happens if PPP loan funds are misused or not fully used?

The funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments, as specified under the Paycheck Protection Program Rule; If the funds are knowingly used 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 is expressly excluded from the definition of payroll costs?

  • Any compensation of an employee whose principal place of residence is outside of the United States;
  • The compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessary;
  • Federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020, including the employee’s and the employer’s share of FICA and Railroad Retirement Act taxes, and income taxes required to be withheld from employees; and
  • Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Pub. L. 116-127)

I received my PPP funds – What should I do now?

Documentation Checklist
Documentation verifying BOTH number of FTE employees on payroll and the pay rates for the 8 week period beginning on the date of origination of the PPP loan, including: payroll tax filings reported to the IRS (Form 941); and State income, payroll and unemployment insurance filings.
Documentation verifying payments on covered mortgage obligations, payments on covered lease (or rent obligations), and covered utility payments, including: cancelled checks; payment receipts; transcripts of accounts; or other documents.
A certification from an individual authorized to act on behalf of the borrower that: the documentation presented is true and correct; and the amount for which forgiveness is requested was used to retain employees, make interest payments on a covered mortgage obligation, make payments on a covered rent obligation, or make covered utility payments.
Any other documentation deemed necessary.
Click here to find a Forgiveness Calculator form to complete
Complete this Expense Tracker worksheet throughout the 8 weeks. Be sure to complete all 4 pages of the worksheet, filling in items with blue font lettering.

At the time a borrower applies for forgiveness they should upload documents to our secure server. Click here to upload this completed worksheet and any other information concerning forgiveness to our secure system.

Timeline of Key PPP dates

8 weeks from loan closing, a borrower can begin to submit a request to lender for PPP loan forgiveness, completing all required paperwork and submitting all required documentation.
Lender has 60 days from receipt of forgiveness request to make a decision regarding forgiveness.
6 months from loan closing, Borrower begins making first P&I monthly payment due for remaining unforgivenen portion of loan.
2 years from loan closing, final P&I payment due from Borrower (unless prepaid earlier; no prepayment penalties are allowed on PPP loans)

In honor of Memorial Day, all offices will be closed on Monday, May 25, 2020. We will reopen with regular hours on Tuesday, May 26, 2020.