PPP Loan Forgiveness Resources

Last Updated: 6/5/2020

On June 5, the Paycheck Protection Program Flexibility Act was signed to provide greater flexibility for PPP borrowers. We will update you as new information is available, and encourage you to regularly check the U.S. Department of the Treasury’s website for information.

If you have secured Federal Paycheck Protection Program (PPP) loan funding with the Small Business Administration (SBA) through Eastern Bank, you may be wondering what's next and what to know about your PPP loan forgiveness application.

On May 15, 2020, the SBA released the loan forgiveness application with some instructions, and announced it will soon issue additional information. We will let you know when we begin to accept loan forgiveness applications digitally through our online portal. We are not accepting loan forgiveness applications at this time. In the meantime, we encourage you to visit this resource page regularly for information on what you can do to prepare for PPP loan forgiveness and updates.

6 Points To Remember About The SBA's PPP Loan Forgiveness Application

Here are 6 points to know now about PPP loan forgiveness, as per the SBA’s application and related worksheets announced on May 15th:

1. Payroll Period Flexibility

The SBA has offered some flexibility for payroll during the eight-week (56-day) loan spending period (Covered Period).

     •  You now can choose to calculate payroll costs using an eight-week period starting the day your loan was funded (Covered Period) or using an “Alternative Payroll Covered Period” that aligns with your regular payroll cycle.

          -  For example, if you pay employees bi-weekly, you can start your “Alternative Payroll Covered Period” on the first day of your business’s first pay cycle following disbursement of your loan, making it easier to calculate your total payroll costs in the loan forgiveness application.

2. Expenses Paid and Incurred

Costs eligible for inclusion in your forgiveness application include expenses paid and expenses incurred.

     •  Payroll costs incurred but not paid during the last pay period of the Covered Period or the Alternative Payroll Covered Period are eligible for forgiveness if paid on or before the next regular payroll date.

     •  Eligible nonpayroll costs must be paid during the Covered Period or incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period.

3. FTE Reductions

The SBA issued guidance on full-time equivalent (FTE) reductions that – if not filled by new hires – can be exempted from forgiveness calculations. You can exclude the following situations from forgiveness calculations:

     •  Any positions for which you made a good-faith offer in writing to rehire an employee during the Covered Period, which was rejected by the employee;

     •  Any employees who during the Covered Period were terminated for cause, voluntarily resigned, or voluntarily requested and received a reduction of their hours.

4. Salary and Hourly Wage Reductions

Your loan forgiveness amount may be reduced due to a statutory requirement concerning reductions in employee salary and wages. The amount of loan forgiveness will depend on whether salary or hourly wages during the Covered Period or the Alternative Covered Period were less than from January 1, 2020 – March 31, 2020.

     •  If salary and hourly wage levels were restored, you may be eligible for elimination of the salary and hourly wage reduction amount.

     •  You will need to complete a worksheet – only for employees whose salaries or hourly wages were reduced by more than 25% – to determine whether to reduce the amount of loan forgiveness for which you are eligible.

5. Restoring FTE levels by 6/30/2020

The SBA now allows you to qualify for a safe harbor exemption from loan forgiveness reduction if you restore FTE levels by June 30. This safe harbor applies if the following two conditions are met:

     •  You reduced your business’ FTE employee levels in the period beginning February 15, 2020, and ending April 26, 2020; and

     •  You then restored FTE employee levels by June 30, 2020 to the FTE employee levels in the pay period that included February 15, 2020.

6. Restoring Salary and Hourly Wage Reductions

The SBA issued guidance on calculating reductions in employee salary and wages, and it involves:

     •  Determine if pay was reduced by more than 25%.

     •  Determine if the salary and hourly wage reduction safe harbor is met.

     •  Determine the salary and hourly wage reduction.

You may qualify for a salary and hourly wage safe harbor if certain criteria are met.

Keep in mind, these are just a few points to consider, but are by no means all the steps you may need to take to qualify for PPP loan forgiveness. Finally, as a PPP lender, Eastern Bank can’t offer an opinion on whether the loan of any particular borrower qualifies for forgiveness.

 

Additional Resources: Start Planning For Loan Forgiveness 

If your business has received a PPP loan, you’ll need to meet specific requirements in order to have your loan forgiven. We expect regular updates from the SBA and will provide new information on this page as it becomes available.

PPP Loans: Are you prepared for forgiveness?

If you have received an SBA Paycheck Protection Program loan, the next step is to consider and prepare for forgiveness of your loan. SBA forgiveness is not automatic. You’ll need to apply, and there are a number of strict requirements.

What expenses qualify for PPP loan forgiveness?

The PPP loan is intended to help small businesses keep employees on their payroll. Loans may be forgiven if an eligible small business uses it for full and part-time employee wages during the first eight weeks after the loan money is received.

     •  75% of the loan amount must be used for payroll costs. These include:

          -  Employee salaries - Salary cap is $100,000 per employee.

          -  Group health care benefits, retirement benefits, and state/local taxes on employee salaries.

          -  Note: 1099 employees are ineligible for loan forgiveness calculations.

     •  No more than 25% of the loan amount can be used for non-payroll costs in place prior to February 15, 2020. These include: mortgage interest, rent, and utilities.

Get prepared

A list of the documents each borrower must submit with its PPP loan forgiveness application is available on Page 10 of the SBA application here. You will have to provide proof of qualifying expenses, so you are encouraged to keep very good payroll and expense records. Some businesses may want to consider working with a tax professional or a CPA for help with recordkeeping.

The following actions may increase your likelihood of forgiveness after the eight-week period:

     •  Keep disciplined records: Create account codes or sub-codes so there’s a paper trail for qualified expenses.

     •  Keep supporting documents: Stay organized with your documentation of PPP fund usage - especially for payroll, interest, rent, and utilities payments.

          -  Payroll: Retain payroll registers and proof of ACH transfers. If you outsource this, save your payroll invoice that shows payroll costs and employee benefits.

          -  Utilities: Keep invoices and statements for electric, phone, internet, gas and heating providers.

          -  Rent and mortgage interest: Keep proof of payments.

TIP: Keep your documentation electronically. When it becomes time to submit your application with us, we will be using an online portal and your access to electronic records will be most efficient.

Keep in mind, these are a few preparations your small business may want to consider, but they are by no means all the factors you may need to take into account to qualify for PPP loan forgiveness. Finally, as a PPP lender, Eastern Bank can’t offer an opinion on whether the loan of any particular borrower qualifies for forgiveness.

 

Best Practices on the Path To Forgiveness

 
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Best Practice #1

Forgiveness is not guaranteed

Specific criteria will need to be met if you want to turn your PPP loan into a grant. We will keep you informed as more information becomes available from the SBA, and for now, we are providing some ideas for ways to prepare to help stay on track.

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Best Practice #2

Timing

As it stands today (but there’s discussion in Congress that this may change), you will need to spend your loan amount during the eight-week Covered Period, which begins on the date your loan was disbursed. The portion not spent on qualifying expenses during the Covered Period becomes a regular loan with a 1% interest rate, payable in full over a two year maturity period from your original funding date, with an initial payment deferral of six months.

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Best Practice #3

Other funding

A basic reminder for businesses that received grants under the SBA’s Economic Injury Disaster Loan (EIDL) program. If your business received an EIDL loan with a corresponding emergency, then any PPP forgiveness would be reduced by that EIDL $10,000 grant portion of the EIDL loan amount.

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Best Practice #4

Covered Period and Alternative Payroll Covered Period

Although they sound similar, they’re quite different. Familiarize yourself with what they mean. “Covered Period” is the 8-week (56-day) period of your PPP loan. The first day is the same as your PPP loan disbursement date. “Alternative Payroll Covered Period” is for administrative convenience. Borrowers with a biweekly or more frequent payroll schedule can choose to calculate eligible payroll costs using the 8-week (56-day) period beginning on the first day of their first pay period following their PPP loan disbursement date, the Alternative Payroll Covered Period.

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Best Practice #5

Safe harbor exemptions

A safe harbor may exempt some borrowers from the loan forgiveness reduction based on two criteria: 1. FTE employee levels, and/or 2. salary and hourly wage reduction.

 

Check here regularly for other best practices that may be added as the SBA announces new guidance around forgiveness. Preparing for forgiveness now and staying informed on the path ahead will help keep your business on course to apply for forgiveness.

The information provided is intended for informational use only and is subject to change.