Up to 100% of your Paycheck Protection Program loan is eligible for forgiveness, meaning that you don’t have to repay it, if you meet the conditions required by the Small Business Administration (SBA). The amount of forgiveness is based on the amount of loan proceeds that you use to cover payroll costs, utilities, rent and mortgage interest obligations over the 8-week period after the loan is made. The details of the forgiveness program are still being finalized, and we expect more guidance from the SBA soon. The information presented here is based on what we know today.
For your loan to be forgivable, you must use at least 75% of the proceeds for payroll costs. The remaining 25% can be used on utilities, rent and mortgage interest obligations that were in effect before February 15, 2020. The total amount forgiven may be reduced if your full-time employee headcount declines or if the salaries and wages that you pay your employees decrease.
Keep in mind that the calculation methodology for forgiveness is solely dictated by SBA and federal rules, regulations, and laws, and is not dictated by the policies, procedures, or guidelines of your bank. We fully expect more detailed guidance prior to your actual forgiveness calculation.
WHAT IS INCLUDED IN FORGIVEN PAYROLL COSTS?
The following compensation is considered eligible payroll costs under the Paycheck Protection Program:
- Salary, wage, commissions or similar compensations
- Payment of cash tips or equivalent
- Payment for sick, vacation, parental, family or medical leave
- Dismissal or separation allowance
- Payments for group health care benefits, including insurance premiums
- Payments for retirement benefits
- Payments of state or local tax on employee compensation
WHAT ARE FORGIVABLE MORTGAGE AND RENT OBLIGATIONS?
Interest payments on your mortgage or rent payments made during the 8-week period after you receive the loan proceeds are eligible for forgiveness. A couple of things to note:
- Only mortgage interest payments, not principal payments, are eligible
- Mortgage or lease agreements must have been in effect prior to February 15, 2020
WHAT ARE COVERED UTILITY PAYMENTS?
Payments for a service for the distribution of electricity, gas, water, transportation, telephone or internet access. The services must have been in place before February 15, 2020.
WHAT IF MY LOAN IS NOT COMPLETELY FORGIVEN?
If your loan is not completely forgiven, the remaining balance, including interest, will amortize over 18 months. This will operate just like a traditional loan with monthly payments to your bank.
WHAT DOCUMENTATION WILL I NEED TO PROVIDE MY LENDER TO BE APPROVED FOR FORGIVENESS?
Your bank will request the supporting documentation and will submit that directly to the SBA on your behalf.
As a part of the application for the PPP loan, each borrower has already provided your lender certain payroll documentation used to calculate the dollar amount of your loan. Additional documentation including covered mortgage interest payments, covered rent payments, covered utilities for the loan, and other supporting documentation will be required at the time of your request for forgiveness.
Any request for forgiveness must be accompanied with supporting documentation similar in form and fashion to the original documents you submitted, as well as any other tax filings, cancelled checks and additional information your lender or the SBA may request.
For more COVID-19 relief information and small business resources, visit our Crisis Small Business Resources page.
This information is accurate and updated as of 4.14.2020. Terms and conditions are subject to change.