SBA Paycheck Protection Program (PPP) Loan Forgiveness Resource Page

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Important Note: On June 5, 2020, the Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act) was signed into law, amending the CARES Act. The Flexibility Act changed key provisions, such as the loan maturity, deferral of loan payments, and forgiveness provisions. See the section below for more details.

The intent of this page is to provide you with tips and information about how to use your loan, documentation requirements and current general eligibility requirements for forgiveness. 

Flexibility Act Amendments

Key amendments to the PPP Program made by the Flexibility Act include:

Extension of the Forgiveness Period

  • Before the passage of the Flexibility Act, the “loan forgiveness period” for PPP funds expended on authorized uses was limited to the eight (8) week period immediately following receipt of the loan funds; however, the Flexibility Act has now expanded the “loan forgiveness period” to twenty-four (24) weeks following the date of the loan disbursement, but under no circumstances, to end later than December 31, 2020.

Reduction to Minimum Required Use of Proceeds for Payroll Costs

  • As indicated in our prior iteration of this FAQ, the PPP previously required that at least seventy-five percent (75%) of loan proceeds were applied toward “payroll costs,” as defined in the CARES Act. However, the Flexibility Act has now reduced the minimum required amount to qualify for total loan forgiveness to a requirement that at least sixty percent (60%) be spent toward “payroll costs.” Please note, however, if less than sixty percent (60%) of the loan amount is used toward payroll costs, some portion of the loan may still be subject to at least partial forgiveness.

Extension of the Safe Harbor Period for Loan Forgiveness

  • The Flexibility Act also extended the period in which a PPP recipient has to eliminate reduction in employment, salary and wages that may have otherwise reduced the amount forgiven: whereas the previous Program indicated that loan recipients had only until June 30, 2020 to take action to eliminate these reductions, the Flexibility Act extended that period until December 31, 2020.
  • Importantly, the Flexibility Act also included a provision indicating that loan forgiveness will not be reduced if a recipient is able to demonstrate in good faith that:
    • They could not rehire individuals who were employees on February 15, 2020; and they could not rehire similarly qualified employees for unfilled positions on or before December 31, 2020; OR
    • A recipient could not return his/her business to the same level of activity (as measured on February 15, 2020) due to compliance with requirements 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.

Potential Extension of Payment Deferral

  • The Flexibility Act adjusted the payment deferral period (the period between the loan disbursement and the first payment date) to the later of six months or the “date on which the amount of forgiveness determined under Section 1106 of the CARES Act is remitted by the lender.” In the event a PPP loan recipient fails to apply for loan forgiveness within ten (10) months after the last day of the twenty-four (24) week “loan forgiveness period,” the first payment will then be due.

Extension to Maturity Date

  • Loans approved by the SBA on or after June 5, 2020 are now subject to a five (5) year maturity date, as updated by the Flexibility Act. A PPP loan approved by the SBA prior to June 5, 2020 may be subject to a five (5) year maturity date as well (as opposed to the prior two (2) year maturity period) upon “mutual agreement of the PPP loan recipient and his or her lender.”

We anticipate additional changes may occur; once we have additional clarity about any changes to the forgiveness eligibility, we will update this page with that information.

General Documentation Requirements

On May 15, 2020, the SBA recently released guidance about the type of documentation that must be retained and submitted with the PPP Loan Forgiveness Application. This is the most current guidance we have on the documentation that will be required to be submitted to the SBA in order to prove eligibility for loan forgiveness.

Payroll. You will need to ensure you are retaining documentation verifying payment of any cash compensation and non-cash benefit payments to each of your employees. Generally, acceptable documentation includes:

  • Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees, including the salary or hourly wage(s) paid to each employee from January 2019 to present
  • Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans
  • Tax Forms, or tax reports prepared by a third-party payroll service provider, which include:
    • Payroll tax filing reported, or that will be reported, to the IRS (typically, Form 941), AND
    • Quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the state in which your business pays taxes

Employee Records. To demonstrate the employees you had, and currently have, on your payroll, you will need documentation, such as paystubs, payroll reports (prepared by you or a third-party payroll service provider), payroll tax filings reported, or that will be reported, (typically a Form 941), state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported to the state in which your business pays taxes.

  • You should also be prepared to submit any documentation regarding any employee job offers and/or refusals, firings for cause, voluntary resignations and written requests by any employee for reductions in work schedule, either due to the COVID-19 emergency, or otherwise.

Nonpayroll: In order to substantiate any nonpayroll costs eligible for forgiveness under the Program, you will need to retain documentation verifying the existence of the obligations or services prior to February 15, 2020, and the payments you have made toward those obligations or services with your PPP funds. Types of “nonpayroll” obligations or services include the following:

  • Business mortgage interest payments: to validate these costs, you will need to have a copy of your lender amortization schedule and receipts or cancelled checks verifying that you used your PPP funds to make these payments. You can also use lender account statements to verify interest amounts and the documentation of the payments you made toward those obligations. Be sure to save lender accounts statements from at least February 2020.
  • Business Rent or Lease Payments: in order to prove the amount of your rent or lease payments, you will need to retain and produce a copy of your current lease agreement and any receipts or cancelled checks verifying that you have made payments toward your business lease or rent from the PPP funds you received.
  • Business Utility Payments: to validate that you have spent the PPP funds on your business’s utility costs, you will need to retain and produce copies of any utility and/or service invoices from at least February 2020, as well as receipts, cancelled checks and/or account statements reflecting that you have made such required payments.

IMPORTANT: It is critical that you start compiling and maintaining all of this documentation now, organized by category as best you can so that you can demonstrate your use of the PPP loan. Please note that you will need to retain all of this documentation for at least six years after the date the loan is forgiven or paid in full. The SBA has indicated that they are planning to audit many of these loans, and we want to ensure you are as prepared for a potential audit as possible.

General Use Requirements

When you signed your loan application for the PPP loan, you indicated that you would use all SBA loan proceeds only for “business-related purposes.” The application indicates that “business-related purposes” generally means: the payment of payroll, like your employee salaries, wages and benefits; the payment of mortgage interest; the payment of business lease or rent obligations; and the payment of the business’s utility payments. 

What qualifies as “payroll costs?”

Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation. Source: Section 2F, Interim Federal Rules 

What is excluded from “payroll costs?”

Any compensation of an employee whose principal place of residence is outside of the United States; compensation of an individual employee in excess of an annual salary of $100,000; Federal employment taxes imposed or withheld between February 15, 2020 and December 31, 2020 and income taxes required to be withheld from employees; and qualified sick and family leave wages, for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116–127). Source: Section 2G, Interim Federal Rules

Are payments made to an independent contractor included?

No. Per the FAQs, amounts paid to independent contractor are excluded from a borrower’s payroll costs.

What is included in “utilities?”

“Utilities” are defined as electricity, gas, water, transportation, telephone or internet access for service which began prior to February 15, 2020, as well as gas used when driving a business vehicle. Source: CARES Act, Sec.1106(a)(5)

What are the acceptable uses of PPP funds for self-employed individuals?

Among the acceptable use of PPP funds identified for self-employed individuals are: owner compensation replacement (calculated based on 8/52 of 2019 net profit from the Form 1040 Schedule C); employee payroll costs; business mortgage interest payments on real/personal property; business rent and utility payments; and interest payments on debt obligations incurred before February 15, 2020

Certification Reminder

As we have received inquiries from the SBA requesting additional information about some of the loans we have facilitated, we did want to remind our customers of the information contained within the Borrower’s Certification, which you signed as part of your loan application. Among the other good faith certifications to which you attested, you indicated that:

  • During the period beginning on February 15, 2020 and ending on December 31, 2020, the Applicant has not and will not receive another loan under the Paycheck Protection Program. In other words, you certified that you would only receive one PPP loan per each business entity you own or in which you have interest.
  • The Applicant was in operation on February 15, 2020 and had employees for whom it paid salaries and payroll taxes (including yourself, if you are self employed).
  • The funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments, as specified under the Paycheck Protection Program Rule.

Please note that both the original Loan Application, as well as the current Forgiveness Application include certifications that require you to attest that the information you have provided is true and correct, and that there are potential criminal penalties for the submission of a false statement(s).

In other words, it is very important that you save all your documentation and ensure that the information and validating documents you submit are true and accurate to the best of your knowledge.

Specific FAQs

Do I request loan forgiveness through Opportunity Fund?

  • Since you obtained your PPP loan through Opportunity Fund, your forgiveness application will be submitted through Opportunity Fund. We are currently working on building a process around the submission of the forgiveness application; we are also awaiting additional updates from the SBA and Congress on the details of forgiveness eligibility.

When can I request loan forgiveness for my PPP loan?

  • Not quite yet. We are awaiting an amended Forgiveness Application from the SBA, though we do expect to receive that quite soon. We will keep you apprised of updates as we receive them; guidance on completion of the Forgiveness Application, to the extent necessary or applicable, will be released in accord with the updates as we receive them.

Am I being assessed interest while the SBA determines the forgiveness amount?

  • Opportunity Fund has decided not to assess interest on PPP loans until the forgiveness amount from the SBA is calculated and applied to your loan balance. Upon determination of the forgiveness amount, and after the application of that amount to your loan balance, your remaining loan balance will be determined and will be assessed interest at 1% per the terms of the PPP program. You will be sent a statement indicating the amount of forgiveness approved by the SBA after we receive that information. Prior to your first payment date, you will receive a detailed statement indicating the amount of your loan subject to forgiveness, if any, and calculation of the required monthly payment amount(s) as a result.

Should I start making payments on the balance of the loan?

  • While we are waiting for additional guidance from the SBA as to forgiveness eligibility, Opportunity Fund does not recommend making any payments toward the loan, as we do not yet know the final balance of the loan. Because you are not being assessed any interest on the loan balance while we await updated forgiveness guidance, there is no penalty for waiting to make a prepayment. Remember that your first payment is not due until the later of six (6) months from the date of disbursement, or when the SBA determines the amount of your loan forgiveness and remits that amount to Opportunity Fund, your lender.

Is there anything I should do to prepare for the loan forgiveness application?

  • Right now, the best thing you can do is to compile and retain the necessary documentation related to validating the way you have spent the PPP loan proceeds. You will need to provide all that documentation to Opportunity Fund as part of your forgiveness application.
  • Currently, the guidance around forgiveness indicates that the loan may be fully forgiven if at least sixty percent (60%) the funds are used for payroll costs, interest on mortgages, rent, and utilities paid during the twenty-four (24) week period beginning on date loan funds were disbursed.

Please note: based on current guidance, there is a higher likelihood of full loan forgiveness if at least 60% of the loan amount is used for payroll during the 24-week period beginning on the date the loan funds were disbursed.

Number of Staff: Loan forgiveness will likely* be reduced if the business decreases its full-time employee headcount; however please note that the amendments of the Flexibility Act do provide that loan forgiveness will not be reduced if a recipient is able to demonstrate in good faith that:

  • They could not rehire individuals who were employees on February 15, 2020; and they could not rehire similarly qualified employees for unfilled positions on or before December 31, 2020; OR
  • A recipient could not return his/her business to the same level of activity (as measured on February 15, 2020) due to compliance with requirements 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.

Level of Payroll: Loan forgiveness will also likely* be reduced if the business decreased salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.

Re-Hiring: According to current guidance, businesses have until December 31, 2020 to restore their full-time employment and salary levels reflected on February 15, 2020.

*Please note that the calculator, and any statements on this Guide are based on Opportunity Fund’s interpretation of the current guidance offered by the SBA and the U.S. Treasury Department as of June 15, 2020.

What happens if my loan is not eligible for forgiveness, in whole or in part?

  • Any unforgiven portion of your PPP loan is your repayment responsibility.

Is there a timeline in which I need to use the proceeds of the PPP loan?

  • Currently, the guidance around forgiveness indicates that the loan may be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities paid during 24-week period beginning on date the loan funds were disbursed.*

*Again, we expect to see updated guidance from Congress in the SBA in the very near future that will directly impact this requirement. Opportunity Fund is striving to stay on top of further guidance as it is issued, and as soon as we have updated guidance, we will update this page.

Will a borrower’s PPP loan forgiveness be reduced if the borrower laid off an employee, offered to rehire the same employee but the employee declined to accept the employment offer?

  • No. Within the SBA’s FAQs*, they have indicated that, “the SBA and the Treasury intend to issue an interim final rule excluding laid-off employees to whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act loan forgiveness reduction calculation.” The SBA went on to note that, to qualify for this exception, the borrower must have made a written offer of rehire in good faith, and that the employee’s rejection of that offer must be documented by the borrower.
  • Note: it’s critical that you save all documentation related to offers of employment or rejection of employment.

*for a link to the SBA’s FAQ for Lenders and Borrowers, please refer to the link at the end of this section.

Is the forgiveness of the loan taxable income?

  • Any forgiveness of the PPP loan is not going to be considered taxable income by the federal government. Please note, however, that the individual states are working to provide guidance on the issue of state taxability.
  • Please note: if you have specific questions about the tax implications of your PPP loan, you should talk to a qualified tax advisor or CPA in your state.

 

For additional information, and the most recent guidance directly from the SBA, you can review the current iteration of the SBA’s FAQ for Lenders and Borrowers here: https://www.sba.gov/document/support–faq-lenders-borrowers

Please note that the calculator, and any statements on this Guide are based on Opportunity Fund’s interpretation of the current guidance offered by the SBA and the U.S. Treasury Department as of June 15, 2020. Please be aware that additional guidance may be provided by either or both agencies at any time, and it may directly impact whether a loan is forgiven in whole or in part. Opportunity Fund is striving to stay on top of further guidance as it is issued and will update this page with that information once it is received.

Please also noteThe information provided on this website does not, and is not intended to, constitute legal or tax advice; instead, all information, content and materials on this site are for general informational purposes and are intended solely to help our borrowers navigate the requirements of the SBA PPP loan program. If you have questions about your specific facts or circumstances, you should consult an attorney or a qualified tax advisor or CPA. Given the nature of the guidance, please be aware that the information on this website may not constitute the most up-to-date information.