All information regarding about the Paycheck Protection Program and PPP loan forgiveness is sourced from the Official Small Business Administration (SBA) site.
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.”
First draw of the PPP loans may be eligible for borrowers to receive forgiveness if during the 8 to 24 week period following loan disbursement:
First draw of the PPP loans may be eligible for borrowers to receive forgiveness if during the 8 to 24 week period following loan disbursement:
The SBA officially announced that borrowers who received PPP loans of $150,000 or less will qualify for streamlined loan forgiveness automatically.
Borrowers will be required to submit a one-page certification that pertains:
The record retention guidelines for these smaller loans has been reduced to 4 years for employee records and 3 years for compliance records.
The forgiveness amount may be reduced if you have laid off employees or reduced their salaries. Therefore, 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. For example, 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.
Economic Injury and Disaster Loan (EIDL) Information
The SBA requires the following documentation be provided as evidence that the borrower has met employee retention requirements:
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.