If you have questions regarding the status of your loan, call us at 800.526.9127 or reach out to your banker for details. For additional information on how loans may qualify for forgiveness see below.
Paycheck Protection Program Details
These loans are intended for businesses with not more than 500 employees or, if applicable, the size standard in number of employees established by the Small Business Administration for the industry in which the business operates. These loans are also available to sole proprietors, independent contractors and eligible self-employed individuals.
A portion of these loans may be forgivable, meaning the entire amount may not have to be paid back, if you business fits the criteria outlined by the SBA. Following certain guidelines and minus required expenses, borrowers may be forgiven the principal of these loans used to pay eight weeks’ worth payroll cost, mortgage interest payments and obligations, rent and utility payments.
Information on Forgiveness
On June 5, the Paycheck Protection Program Flexibility Act (PPPFA) was signed and as the name suggests it allows for greater flexibility when qualifying for Paycheck Protection Program (PPP) loan forgiveness. The PPPFA modified, among other items, the following as it relates to forgiveness of a PPP loan:
Extended the time period to spend loan funds.
Originally, businesses had 8 weeks to spend their funds. Under the PPPFA, businesses now have 24 weeks or until December 31, 2020, whichever comes first, to spend their funds.
Reduced the percentage of the funds that must be spent on Payroll costs.
Originally, businesses needed to spend 75% of their loan amount on payroll costs. Under the PPPFA, businesses need to spend 60% of the loan amount on payroll. This change means that forgivable non-payroll expenses can be up to 40% of the original loan amount.
NOTE: The items that qualify as forgivable expenses have NOT been modified and remain the same.
Lengthened the repayment period.
Loans that are not forgiven have two years to repay the funds. If your loan was originated on or after June 5, 2020, you may have (under the PPPFA) five years to repay the funds. Speak to your banker to clarify your repayment details.
NOTE: The interest rate of 1% has not changed.
To apply for forgiveness, your business will need to meet specific requirements in order to do so.
The SBA has stated that a loan may be forgiven if an eligible small business uses it for full and part-time employee wages during the first 24 weeks after the loan funds were received. Additional guidelines are:
No less than 60% of the loan amount must be used for payroll costs, which include:
· Employee salaries
· Salary cap is $100,000 per employee.
· Group health care benefits, retirement benefits, and state/local taxes on employee salaries.
Note: 1099 employees are ineligible for loan forgiveness calculations.
No more than 40% of the loan amount can be used for non-payroll costs in place prior to February 15, 2020, which include:
· Mortgage Interest
To prepare for forgiveness, we suggest you do the following:
· Compile clear, well organized, and documented proof of qualifying expenses.
· Payroll: Retain payroll registers and proof of ACH transfers. If you outsource this, save your payroll invoice that shows payroll costs and employee benefits.
· Rent and Mortgage Interest: keep proof of payments.
· Utilities: Keep invoices and statements for electric, phone, internet, gas and heating providers.
NOTE: You may want to consider working with a tax professional or a CPA for help with record-keeping. Additionally, keep an electronic version of your documentation as these records will be needed electronically when preparing your forgiveness application.
For more information tailored specifically to you or if you have questions regarding your loan, please contact your lender directly or call us at 800.526.9127. We’re open for business and ready to help ensure all of us get through this together.