Paycheck Protection Program – Loan Forgiveness

The Paycheck Protection Program (PPP) is a loan from your bank backed by the Small Business Administration (SBA) designed to provide a direct incentive for small businesses to keep their workers on the payroll during the COVID-19 crisis.

The SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll and other specific expenses.

Paycheck Protection Program Loan

What Can PPP Loans Be Used For?

PPP loans may be used for payroll costs, healthcare, rent, utilities, and mortgage interest incurred by the business.

What counts as payroll costs?

Payroll costs paid by the employer include:

• Salary, wages, commissions, or tips. Wages are capped at $100,000 on an annualized basis for each employee.
• Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits (medical, dental and vision) including insurance premiums; and payment of any retirement benefit
• State and local taxes assessed on compensation

What is excluded from payroll costs?

The CARES Act expressly excludes:

• Qualified sick and family leave wages for which a credit is allowed under the Families First Coronavirus Response Act (FFCRA).
• Payment to independent contractors.
• Employer’s share of FICA taxes

Loan Forgiveness

How much of my loan will be forgiven?

If you use the loan amount for anything other than payroll costs, mortgage interest, rent and utilities payments it must be repaid. No more than 25% of the forgiven amount may be used for non-payroll costs.

What timeframe do I use to measure expenses?

The federal government will forgive the loans in an amount equal to the amount of qualifying costs spent during an eight-week period after the origination of the loan.

Will my loan forgiveness be reduced?

The amount of the forgiveness for the loans will be reduced if you do not maintain your staff and payroll.
• Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
• Level of Payroll: Your loan forgiveness will be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.

If I reduced my workforce, can I re-hire to avoid a reduction in forgiveness?

You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

How can I request loan forgiveness?

The lender that is servicing the loan is responsible for forgiveness determination. Contact the lender now to determine the documentation needed to support the eligible expenses so you can begin tracking and retaining the necessary information.

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