Business Banking
Paycheck Protection Plan Forgiveness

Paycheck Protection Plan Forgiveness

Details about the Paycheck Protection Program (PPP) continue to emerge and, in some cases, change. This information is not advice, is a summary provided as a courtesy only for our customers, and is based on the latest information from the Small Business Administration (SBA). Any of the listed requirements or details are subject to change, and any future instructions or interpretations from the SBA will supersede any information provided here. The most recent information about PPP loan forgiveness or the Coronavirus Aid, Relief, and Economic Security (CARES) Act may be found at SBA.gov and Treasury.gov. Each borrower is obligated to understand and abide by the SBA’s rules, and we encourage you to check those sites frequently for updated information.

Customers Bank does not offer tax or legal advice, and this information does not address all provisions of the CARES Act. Customers Bank recommends that borrowers consult their tax advisors and/or legal counsel with questions about PPP eligibility, the CARES Act, and how the borrower’s specific financial situation may impact the advisability of applying for a PPP loan or a borrower’s eligibility to qualify for forgiveness of a PPP loan.

Can I still apply for a Paycheck Protection Program Loan?

If you have not applied and are eligible, loans can be approved through June 30, 2020.

I am still waiting for my PPP Loan funding. Is there anything I can do to prepare for forgiveness?

Yes. Create a separate bank account in the name of the firm – identical to the name as used in your PPP Loan application and have the funds deposited in that account to create a clear record of the spending.

How long do I have to spend the funds I receive from a PPP Loan?

The original program required the funds to be spent within eight (8) weeks of funding, but recently the program was changed to allow borrowers to spend the funds by twenty-four (24) weeks from the funding date or December 31, 2020; whichever is earlier. The covered period is the election of the borrower.

I received my funding early in the program and just about spent all it to make the eight (8) week requirement. What should I do?

Spend the remaining funds in accordance with the loan requirements and apply for forgiveness soon. You don’t have to wait 24 weeks for forgiveness. Alternatively, if you spend the funds but do not apply for forgiveness immediately, your repayment schedule will be deferred although interest will accrue on the loan.

How soon can I apply for PPP Loan forgiveness?

You can apply at the conclusion of your Covered Period (8 weeks up to 24 weeks), or as soon as you have spent all of the funds. And the earliest you can apply is Monday, June 15, 2020.

How long will it take until I learn how much of my PPP Loan is forgiven?

It could be several months. Federal law and program guidelines give lenders 60 days to process PPP Loan forgiveness applications and then the SBA has 90 days to review the lenders’ submittals.

To earn loan forgiveness, how much do I have to spend on payroll?

To be eligible for PPP loan forgiveness, the most recent legislation and SBA guidance require a borrower to spend at least 60% of the loan on payroll including health care benefits.

Do I have to keep all of my workers in order to be eligible for PPP Loan forgiveness?

Yes. PPP Loan forgiveness will be reduced if there is a reduction in employees unless:

  • Rehired by December 31, 2020;
  • An individual refuses, in writing, an opportunity to return to work;
  • The employer is unable to hire the same or similarly qualitied employees; or
  • The employer can document “the inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.”

How is my workforce base-line measured in order for me to be eligible for PPP Loan forgiveness?

The borrowers may elect to measure their baseline employee count as the average number of FTE employees on payroll per month employed by the PPP borrower between February 15, 2019 and June 30, 2019. However, a borrower can also elect to use the average FTE from January 1, 2020 through February 29, 2020 as the baseline for measuring employee retention.

In the case of a seasonal employer, the average number of FTE employees on payroll per month employed by the borrower between February 15, 2019 and June 30, 2019; between January 1, 2020 and February 29, 2020; or any consecutive twelve week period between May 1, 2019 and September 15, 2019.

What does it mean if my full PPP Loan is not forgiven?

The PPP Loan is an actual loan that must be repaid, less the portion that is forgiven. If the SBA approves forgiveness of a large portion of your loan, but not all of the loan, the remaining balance must be repaid. For example: if you borrowed $100,000 and the SBA approves forgiveness for 90% of the loan, you would have to repay 10% or $10,000.

What is the interest rate on my loan and how long will that rate apply?

PPP Loans are a fixed rate loan at 1.0% per year for the life of the loan.

When do I have to start making payments on my PPP Loan?

Payment of principal and interest is deferred until the lender receives payment of the forgiven portion of the loan; or for 10-months after the end of the covered period if there was no application for forgiveness. Interest does accumulate during this time period, however, and is calculated in the repayment schedule.

Are there pre-payment penalties if I pay-off my PPP Loan early?

No. You can pay the unforgiveness balance of your PPP Loan immediately, or faster than the amortization schedule with no penalty.

What happens to my SBA EIDL Disaster Loan Advance?

The SBA EIDL Disaster Loan Advance will be subtracted from the forgiven amount and payable to the lender as part of the PPP Loan.

If I am a sole proprietor, what determines my eligibility for PPP Loan forgiveness?

The basis of forgiveness calculations for a sole proprietor or independent contractor will be 2019 expenditures documented on IRS 1040 Schedule C and the net income from Line 31 of Schedule C.

Are health care benefit payments eligible expenditures for PPP Loan forgiveness?

Payments to purchase health care benefits for employees are eligible expenditures for PPP Loan forgiveness, but payments for health benefits for firm owners are not eligible for forgiveness.

What kind of documentation will I need to earn forgiveness of my SBA PPP Loan?

SBA Forgiveness Application and Schedule A SBA Form 3508
Payroll Documentation

Bank account statements or third-party payroll service provider reports Documenting the amount of cash compensation paid to employees.

Documentation can include IRS Form 1040, Schedule C, E or F; IRS Form 1065 or 1120-S / K1’s.

Payroll Tax Documentation

Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period – typically IRS Form 941. Quarterly state wage reporting business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.

Health Care & Retirement Benefits Documentation

Employer Contributions to employee health insurance and retirement plans Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the borrower included in the forgiveness amount (PPP Schedule A, lines (6) and (7)).

FTE Documentation

The average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019; OR the average number of FTE employees on payroll per month employed by the Borrower between January 1, 2020 and February 29, 2020; OR in the case of a seasonal employer, the average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019; between January 1, 2020 and February 29, 2020; or any consecutive twelve week period between May 1, 2019 and September 15, 2019.

The selected time period must be the same time period selected for purposes of completing PPP Schedule A, line 11.

Documents may include payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941) and state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state. Documents submitted may cover periods longer than the specific time period.

Nonpayroll Expenses – Mortgage Interest

Business mortgage interest can be documented with a copy of the mortgage lender’s amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or mortgage lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.

Nonpayroll Expenses – Rent

Business rent expenses can be documented with a copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the Covered Period; or lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.

Nonpayroll Expenses – Utilities

Business utility payments can be documented with a copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments.

Evidence in Business

Documentation showing business was in operation and had employees at 2/15/20 include tax records, payroll records, bank statements, employee benefits records.