Paycheck Protection Program: Loan Forgiveness

The Paycheck Protection Program (PPP) is a federal loan program established through the Small Business Administration to protect and assist small businesses struggling during COVID-19. PPP Loans are monies used to keep small businesses afloat for 8 weeks. Businesses eligible to participate may apply through any SBA 7(a) lender, federally insured depository institution, federally insured credit union, or Farm Credit System Institution that is participating.

Loans received through the PPP may be fully forgiven so long as the monies are put towards payroll costs, mortgage interest, rent, and utilities. The level of forgiveness is based on the employer’s maintaining or rehiring employees with pre-pandemic maintaining salary levels. The amounts forgiven may be reduced if full-time headcount, salary, or wages declines during the eight (8) week Covered Period.

Filling out the Application for PPP Forgiveness

There are many nuances to the program and there are key provisions and dates to keep top of mind when seeking forgiveness.

  1. The Covered Period is the 8 weeks (56 days) beginning on the day the borrower received their loan proceeds

  2. Mortgage obligations eligible for forgiveness must have accrued prior to February 15, 2020

  3. Rent obligations pursuant to a lease agreement eligible for forgiveness must have been in force prior to February 15, 2020

  4. Utility payments eligible for forgiveness must be for a service that began prior to February 15, 2020

  5. Forgiveness reductions based on changes in salary or wages are based on any changes January 1, 2020 through the end of the Covered Period.

  6. Forgiveness reductions based on full-time equivalency (FTE) employment changes will be negated if employment levels that dropped between February 15, 2020 and April 26, 2020 are restored to the February 15, 2020 level on or before June 30, 2020.

  7. The application for forgiveness expires on October 31, 2020

Documentation of both the expenses and FTE must be provided to your lender in order to be considered for forgiveness.

This blog is intended for informational purposes only and does not constitute legal or financial advice, nor create an attorney-client relationship. If you have further questions regarding PPP forgiveness or your PPP loan, contact your lender, accountant, or personal financial institution.

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