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The Small Business Administration has released the Paycheck Protection Program (PPP) Loan Forgiveness Application. As you know, small business owners may apply to have up to 100% of their loan forgiven. The application sheds some light and provides guidance on the detailed calculations to determine forgiveness amounts. It also tells you what must be submitted with the application. As a bonus feature, it provides step-by-step directions for completing the forms.
Forgiveness Eligibility
To have your loan forgiven, at least 75% of the forgiveness amount must be for payroll costs paid and in place during the eight-week Covered Period. This must be the same as the PPP Loan Disbursement Date. There are also non-payroll costs that are eligible to be forgiven. A quarter of the loan may be used for mortgage, rent, utility and interest on debt obligations paid or in place before Feb. 15, 2020. It is interesting to note that payroll and nonpayroll costs may include expenses paid or in place during the period. The SBA will reduce the amount forgiven by any Economic Injury Disaster Loan advance that was received.
Reductions in Loan Forgiveness
Employers are subject to a reduction in their PPP loan forgiveness amount corresponding with reductions in their average number of full-time equivalent employees during the covered pandemic period, unless they eliminate that reduction – i.e., rehire those employees. The CARES Act lays out a specific calculation for determining these circumstances.
Loan forgiveness will not be reduced for:
- Any positions for which the Borrower made a good-faith, written offer to rehire an employee
- Any employees who were fired for cause, voluntarily resigned, or voluntarily requested and received a reduction of their hours.
The package also includes guidance related to the reduction in forgiveness amounts connected to reductions in salary.
Documentation and Certification
As part of the loan process, borrowers need to maintain certain documentation related to its PPP loan for at least six years after the loan is forgiven or repaid in full. This includes documentation supporting the necessary certification and eligibility. It is important to know that there are penalties for false statements such as “Imprisonment of not more than five years and/or a fine of up to $250,000, two years and/or a fine of not more than $5,000; and, if submitted to a Federally insured institution, by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.”
In the upcoming weeks, the SBA will issue regulations and guidance to further assist borrowers as they complete their applications, and to provide lenders with guidance on their responsibilities. Click here to access the SBA PPP Loan Forgiveness Application and stay up to date with important SBA news by visiting the SBA website at www.sba.gov.
As we navigate through these times of uncertainty and adjust to new normal, we here are at The Foresight Companies want to be your source for all topics related to your business operations.
Please visit our COVID-19 Business Operations Resource Center frequently as we continue to update as changes are occurring.
If you have any questions or concerns, please do not hesitate to pick up the phone and give one of us a call at 1-800-426-0165.
*Please note that as information is updated and modified, terms and conditions are subject to change.