What to Know About the Paycheck Protection Program: Loan Forgiveness
Update 3/30/21: On Tuesday, March 30, President Biden signed into law a 2 month extension for the current round of Paycheck Protection Program funding. In order to receive funds through the program, eligible businesses will need to apply by May 31st.
Update, 8/7/20: As of August 8, the SBA will no longer be accepting applications for Paycheck Protection Program loans. Learn about other small business financing options.
Update 8/5/2020: On August 4th, the U.S. Small Business Association published new Paycheck Protection Program loan forgiveness FAQs. Our teams are working to review this new guidance and we will continue to keep you updated on how this may impact the loan forgiveness process, what is required as part of your forgiveness application, and how to use our in-app tools to support your application.
Update 7/4/2020: On July 4, 2020, President Trump signed into law an extension of the Paycheck Protection Program (PPP) loan application deadline to August 8. Looking to apply for a loan? Find an SBA-approved lender. If you’re not sure if PPP is the right approach for your small business, start your research with these resources: maximizing PPP loan forgiveness and explore other small business financing options.
Update 7/2/2020: The Paycheck Protection Program is currently not accepting applications for loans, as the deadline to have a loan approved. As of July 1, both the U.S. Senate and House of Representatives have passed an extension of the application deadline to August 8. This now goes for President Trump's signature to become law. If you are planning to apply for a loan should the program reopen to new applications, get a head start: find an SBA-approved lender. While we await further news, you can learn more about maximizing PPP loan forgiveness and explore other small business financing options.
Update 6/30: As of June 30, 2020 applications for loans through the Paycheck Protection Program are closed. Looking for funding? Learn more about small business funding options that are still available.
Update, 6/22: SurePayroll customer? If you’re planning to apply for PPP loan forgiveness, you can now access an interactive forgiveness estimator and worksheet directly from your dashboard. Log in and click on the yellow banner to get started.
Update, 6/9: The Paycheck Protection Program (PPP) Flexibility Act, which was signed into law June 5, 2020, made some significant changes to the PPP loan and loan forgiveness process. Read this blog post to learn more about the Flexibility Act. For additional PPP Loan Forgiveness support, check out the FAQs and forgiveness estimator on our Maximizing Loan Forgiveness hub.
Update, 6/5/20: On Friday, June 5 President Trump signed the Paycheck Protection Program (PPP) Flexibility Act of 2020 into law. Our online PPP Loan Forgiveness Estimator has been updated to reflect the new guidance in the law. We continue to actively update our existing PPP resources on this site as additional guidance is released.
Update, 6/3/20: On Wednesday, June 3 the U.S. Senate passed the Paycheck Protection Program (PPP) Flexibility Act of 2020, modifying certain provisions related to forgiveness of loans under the Paycheck Protection Program. The bill, having passed the legislative branch, now heads to the White House, where President Trump is expected to sign it into law. We are closely monitoring any legislative changes and will work through new guidance to provide up-to-date tools, reporting, and resources to help you maximize your loan forgiveness. Visit our Maximizing PPP Loan Forgiveness hub for the latest.
Update, 5/23/20: Late Friday, May 22 the U.S. Treasury and the Small Business Administration issued two Interim Final Rules: the highly anticipated Interim Final Rule on Loan Forgiveness, and an Interim Final Rule on Loan Review Procedures and Related Borrower Responsibilities. We are working through the new guidance to finalize our reporting, loan forgiveness estimations, and will produce additional content and resources to help you as you seek loan forgiveness. For additional information on maximizing loan forgiveness, please visit our Paycheck Protection Program Loan Forgiveness hub.
Update, 5/18/20: Late Friday, May 15, 2020, the U.S. Treasury and the Small Business Administration released the application for Paycheck Protection Program loan forgiveness application. We are working through the information available to update our loan forgiveness estimator. As a reminder, restoring employee full time equivalent levels and salary/hourly wage levels by June 30, 2020 can help maximize your opportunity for loan forgiveness. Visit our Maximizing Loan Forgiveness hub for the latest updates on PPP forgiveness.
Update 4/22/2020: We’ve developed a PPP Loan Forgiveness Estimator to assist you in understanding what part of your loan may be eligible for forgiveness. To estimate how much of your loan may qualify for forgiveness, head over to our estimator.
Update, 4/10/2020: We know that navigating the various relief options can be a challenge. Jackson Lewis has published a flow chart to help businesses understand their eligibility and opportunity for forgiveness under the Paycheck Protection Program.
Update: We’ve created a specialized report that is currently available for SurePayroll users to help make applying for a Paycheck Protection Program (PPP) loan simpler. Log into your account to get your report today! Note that household employers are not eligible for a PPP loan.
Is any portion of a PP loan forgiven?
An eligible recipient shall be eligible for forgiveness of indebtedness on a covered loan in an amount equal to the sum of the following costs incurred and payments made during the covered period:
· Payroll costs (as defined in Q7, above)
· Any payment of interest on any covered mortgage obligation (not including prepayment of or payment on principal)
· Any payment on any covered rent obligation
· Any covered utility payments
· Additional wages are considered for employers with tipped employees
NOTE: This amount (the “Base Loan Forgiveness Amount”) is potentially subject to further reductions (see Q12).
What is the covered period for purposes of the loan forgiveness provisions?
“Covered period” means the 8-week period beginning on the date of the origination of a covered loan.
Are there further potential reductions to the Base Loan Forgiveness Amount (Q7)?
Yes, there are potential reductions for reductions in employees and reductions in salaries.
Reductions in Employees:
The Base Loan Forgiveness Amount is reduced by multiplying it by the following fraction:
· The numerator of which is the average number of full-time equivalent employees per month employed by the eligible recipient during the covered period
· The denominator of which is, at the election of the eligible recipient, either the average number of full-time equivalent employees per month employed by the eligible recipient during the period beginning on February 15, 2019 and ending on June 30, 2019, or the average number of full-time equivalent employees per month employed by the eligible recipient during the period beginning on January 1, 2020 and ending on February 29, 2020.
For example, if the company employs 50 employees during the covered period and employed 100 employees during the period between January 1, 2020 and February 29, 2020, the Base Loan Forgiveness Amount would be multiplied by 50/100 or one-half.
Reductions in Salaries:
Taking into account only employees who did NOT earn $100,000 (prorated for the applicable period of employment) for any pay period in 2019, the Base Loan Forgiveness Amount is further reduced by any reduction in such employees’ wages during the covered period that is in excess of 25 percent of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period.
What happens if I rehire employees or restore wages?
The reductions to the Base Loan Forgiveness Amount for reductions in employees or wages (Q10) do not apply if the borrower eliminates these reductions no later than June 30, 2020.
How does a borrower claim loan forgiveness?
The borrower must submit to the lender an application that includes:
· documentation verifying the number of full-time equivalent employees on payroll and pay rates for the applicable periods including, payroll tax filings reported to the Internal Revenue Service and State income, payroll, and unemployment insurance filings;
· documentation verifying payments on covered mortgage obligations, lease
obligations and utility payments
· certifications that the documentation presented is true and correct
The amount for which forgiveness is requested was used to retain employees, make interest payments on a covered mortgage obligation, make payments on a covered rent obligation, or make covered utility payments, and any other documentation the Administrator determines necessary.
The statute makes clear that will be no loan forgiveness absent documentation.
Is the loan forgiveness considered taxable income to the borrower?
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