Paycheck Protection Loan Forgiveness

Posted on May 22, 2020

This post includes information and resources from a variety of sources with the intention of answering all your questions about loan forgiveness and directing you to the information/resources you need to prepare for and complete your loan forgiveness application successfully…

Original post May 22, 2020 / Updated July 2, 2020

Paycheck Protection Plan and Forgiveness Application Updates

[Source: Small Business Administration-Utah] The Paycheck Protection Program (PPP) has so far approved loans for 48,861 Utah companies for a combined total of $5,188,288,610 (as of June 17, 2020). As of today, PPP money is still available for new loans. Loan applications must be approved by June 30, 2020. There is still time for small businesses, including veteran-owned businesses, to take advantage of this historic program. For additional resources and a list of lenders participating in the Paycheck Protection Program, visit www.sba.gov/PPP. A new PPP loan application has been released – download here.

In addition, a revised, borrower-friendly Paycheck Protection Program (PPP) loan forgiveness application implementing the PPP Flexibility Act of 2020 is now available. In addition to revising the full forgiveness application, SBA also published a new EZ version of the forgiveness application that applies to borrowers who:

Are self-employed and have no employees; OR
Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.

The EZ forgiveness application should be more user friendly as it requires fewer calculations and less documentation for eligible borrowers.

Both applications give borrowers the option of using the original 8-week covered period (if their loan was made before June 5, 2020) or an extended 24-week covered period. These changes will result in a more efficient process and make it easier for businesses to realize full forgiveness of their PPP loan.

Click here to download EZ Forgiveness Application. For the full Forgiveness Application, click here.

Updated PPP Loan Application

[Source: Small Business Administration-Utah] The U.S. Small Business Administration, in consultation with the Department of Treasury, has released further information concerning the Paycheck Protection Program (PPP) Flexibility Act.

Borrower Application for PPP

For any Utah small businesses that have not yet applied for a Paycheck Protection Program loan, there is still funding available (as of June 17, 2020). We strongly encourage you to apply right away through your lender. The last date a PPP loan application can be approved is June 30, 2020.

Paycheck Protection Flexibility Act

[Source: Preferred CFO] On June 5, 2020, the Payroll Protection Plan Flexibility Act was signed into law. The Flexibility Act will make it easier for PPP loan recipients to qualify for maximum loan forgiveness. Updates under the Payroll Protection Plan Flexibility Act (PPPFA) include:

Borrowers can apply for a Payroll Protection Plan loan up to December 31, 2020, if funds remain available.
Borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. This is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
The payroll expenditure requirement drops to 60% from 75%. Borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met.
Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, 2020, a change from the previous deadline of June 30, 2020.
Two new exceptions are included, allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good-faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
Borrowers now have five years to repay the loan instead of two. The interest rate remains at 1%.
Businesses that took a PPP loan are allowed to also delay payment of their payroll taxes, which was prohibited under the CARES Act.

For detailed information about the Payroll Protection Plan Flexibility Act of 2020 click here.

PPP Loan Forgiveness Application Walkthrough Video

[Source: Silicon Slopes] Under the Paycheck Protection Program (PPP), loans may be forgiven if borrowers use the funds to maintain their payrolls and pay other specified expenses. Watch the Silicon Slopes video below on the recently released Paycheck Protection Program Loan Forgiveness Application with accounting and banking experts. The panel walks you through the application to explain calculations and concepts that will apply to the PPP loan forgiveness.

An additional webinar from Silicon Slopes with changes from the Flexibility Act was hosted on June 30, 2020:

Guide to PPP Loan Forgiveness

[Source: U.S. Chamber of Commerce] The U.S. Chamber of Commerce has also released a new guide to help businesses navigate loan forgiveness under the Paycheck Protection Program: Guide to PPP Loan Forgiveness. This guide is designed to help borrowers understand the process by which their loan forgiveness amount will be calculated and the overall approach of the loan forgiveness process. Click here for more information and to download the guide.

PPP Loan Forgiveness: Step-by-Step Explainer Video

[Source: U.S. Chamber of Commerce] A step-by-step explainer video is also available on the U.S. Chamber of Commerce YouTube channel:

PPP Loan Forgiveness Tool

[Source: Salt Lake Small Business Development Center] To help Utah companies with the calculations needed for the application, the Salt Lake Small Business Development Center (Salt Lake SBDC) created the PPP Loan Forgiveness Tool, which allows the borrower to enter their employee, payroll, and other cost data. The model will then calculate all the necessary numbers to enter into the PPP Loan Forgiveness Application. Click here to download the PPP Loan Forgiveness Tool. A video walkthrough is available here:

Frequently Asked Questions

[Source: World Trade Center Utah] Many small business owners have questions about how forgiveness works for both the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) loans. Below are some of the most frequently asked questions surrounding forgiveness for the PPP and EIDL loans based on the current rules. Contact to your banker for additional questions.

What if I want to give my loan back?
The recent Treasury guidelines extended the date to return the funds with no questions asked until May 14, 2020.

What is my liability exposure around the loans and forgiveness?
The PPP loans put the burden on the borrower to show “good faith” that they needed the loans despite access to other sources of capital. (For businesses that received a PPP loan for less than $2 million, please reference the safe harbor information below.)

When do you have to start tracking the use of the PPP funds?
The funds must begin upon receipt and extend out eight weeks in order for the loan to be forgiven.

Do I have to use at least 75% of the PPP loan on payroll?
For complete forgiveness, you must ensure that you are using at least 75% of the funds on payroll.

Do I need to hire the same position or keep employees in the same jobs?
No. Your lender will be looking at the amount you spent on payroll and not who fills what job. Note that the position must be a full-time employee and not a contractor in order to count towards forgiveness.

What if I don’t use the funds for payroll or rent, utilities, or interest payments?
On the PPP loan application the borrower is certifying that they will use at least 75% on payroll and the other 25% on rent, utilities, and interest payments. Not doing this might raise questions from your lender, the SBA, or Treasury.

What documentation should I use with my lender to show the money was spent according to the regulations?
The easiest way to do this is to reach out to your payroll provider. If you don’t use a payroll provider then follow the outline of a Schedule C form with backup documentation to show how the money was spent. It is also advisable to keep PPP funds in a separate bank account and make all forgivable expenses out of this dedicated account. (Check with your lender before using a separate bank account – some banking institutions are not allowing this.)

When can I apply for forgiveness?
Most lenders will begin processing forgiveness applications at seven weeks from fund disbursement. However, the lender will make the decision on forgiveness.

If I laid off workers, do I need to rehire the same employees to meet the payroll requirement?
No. Your bank will check that your payroll amount is the same or greater than the 2019 average upon which the loan amount was based. However, if you do extend an offer to an employee who rejects it, you may want to ensure the correspondence is in writing for future reference.

My former employee does not want to be on my payroll because UI benefits are more than they were paid. What should I do?
The primary obligation of a claimant is to become reemployed. The intent of the unemployment insurance program is to assist people during periods of unemployment when suitable work is not available. However, if suitable work is available, the claimant has an obligation to properly apply for and accept offered work. Refusing suitable work will likely result in a loss of unemployment benefits. Employers can report job refusals at jobs.utah.gov/ui/home/Fraud/FraudForm.

Additional Frequently Asked Questions can be downloaded here from the Small Business Administration.

SBA Provides Safe Harbor for Loans

Under the new safe harbor, if a borrower, together with its affiliates (to the extent required under the interim final rule on affiliates), received PPP loans with an original principal amount of less than $2 million, the borrower “will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” The $2 million threshold was determined by SBA to be appropriate because borrowers with “loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans.” The safe harbor is being implemented to help “promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees” and focus the SBA’s limited audit resources on larger loans “where the compliance effort may yield higher returns.”

[Source: Salt Lake Chamber of Commerce] To ensure Utah companies are able to navigate the forgiveness application, the Salt Lake Chamber hosted an instructional webinar on June 3rd – Utah Leads Together: PPP Loan Forgiveness.

Categories: Coronavirus Resources