You got your PPP Loan! Now What?

The PPP loans are being granted to many employers and we have many questions on how these proceeds are to be handled.  We have a prepared a guidance,  FAQs for Using the PPP,  to answer more of the common questions. Please do not hesitate to reach out to us at any time. 

Your loan will be forgiven if you use the loan amount for payroll costs, mortgage interest, rent, and utilities payments. Keep in mind that at least 75 percent of the PPP loan proceeds must be used for Payroll Costs for the loan to be forgiven. The loan proceeds must be used in the 8-week period immediately starting from the date you receive the funds. Employee and compensation levels are to remain as reductions in either category may impact forgivable loan amounts.

Ultimately, it is up to the banks to provide direction and guidance on loan forgiveness as they are the originators of the loans and they will be responsible for processing forgiveness of the loans. There could be differences in he way individual banks interpret the laws/regulations when allowing amounts to be forgiven. Your bank will be the best source for specific guidance on loan forgiveness, but unfortunately they may not have all the answers. Be on the lookout for updates from the U.S. Department of the Treasury guidance as there are still many questions.

According to the U.S. Department of the Treasury, funds from the PPP can be used for:

  • Payroll costs, including paid leave benefits
  • Interest on mortgage obligations, incurred before February 15, 2020
  • Rent, under lease agreement before February 15, 2020
  • Utilities, for which service began before February 15, 2020

Payroll costs include:

  • Salary, wages, commissions or tips (capped at $100,000 on an annualized basis per employee)
  • Employee paid leave benefits including costs for vacation, parental, family, medical or sick leave; allowances for separation or dismissal; payments required for the provision of group health care benefits including insurance premiums (generally considered medical, dental and vision); and payment of any retirement benefit
  • State and local taxes assessed on compensation
  • For a sole proprietor or independent contractor: wages, commissions, income or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

SBA and Treasury Release Paycheck Protection Program Loan Forgiveness Application

The Small Business Administration (SBA), in consultation with the Department of the Treasury, are responsible or releasing the Paycheck Protection Program (PPP) Loan Forgiveness Application and detailed instructions for the application.  The Treasury and the Small Business Administration (SBA) have a new application and instructions for PPP loan forgiveness,  available here. 

The form and instructions inform borrowers how to apply for forgiveness of their PPP loans, consistent with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). SBA will also soon issue regulations and guidance to further assist borrowers as they complete their applications, and to provide lenders with guidance on their responsibilities.

The form and instructions include several measures to reduce compliance burdens and simplify the process for borrowers, including:

  • Options for borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles
  • Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the eight-week period after receiving their PPP loan
  • Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness
  • Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30
  • Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined

The PPP from the CARES Act to provides forgivable loans to eligible small businesses to keep American workers on the payroll during the COVID-19 pandemic. These documents will help small businesses seek forgiveness at the conclusion of the eight week covered period, which begins with the disbursement of their loans.

Please reference our COVID-19 Resources for additional guidance.

Stay Healthy and Stay Safe. 

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