Obtaining Loan Forgiveness

Current Guidance as of 4/11/20

Designed to advance Congress’s goal of keeping workers paid and employed across the United States by providing cashflow assistance to employers who maintain their payroll during this emergency, the core purpose of the SBA Paycheck Protection Program (SBA PPP or PPP) is to devote finite program resources primarily to payroll protection. The PPP provides low cost funds to borrowers to meet eligible payroll costs and other eligible expenses during this temporary time of economic dislocation caused by the Coronavirus. As certified in the application, the funds from the SBA PPP Loan will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments.

Important to consider when attempting to utilize proceeds that may be forgiven:

•  If by 6/30/20, you re-hire your workforce and additionally restore your full-time employment and salary levels for any changes to your workforce made between 2/15/20 and 4/26/20, the re-hire and restoration would be exempted from forgiveness reductions. No governmental guidance requires that employees be physically working, but rather that they be employed.
  • Example, if you had 10 employees prior to 2/15/2020 and reduced your staff to 5 employees during the crisis, you could avoid a reduction in forgiveness by rehiring 5 employees back to 10 total. If salary levels were $100,000 per month before 2/15/2020, then were reduced to $50,000 per month during the crisis, forgiveness reductions could be avoided by returning to the $100,000 salary and 10 employee levels as before.
• Utilize proceeds for payroll costs first.
• Utilize qualifying proceeds within the first 8 weeks from disbursement of the proceeds.

How much of my SBA PPP loan MAY be forgiven?

• The amount of loan proceeds used for qualifying purposes during the 8 weeks following the date of the disbursement of the proceeds.
• The maximum forgiveness is the full principal amount plus any accrued interest; however, stipulations apply and the forgiveness can be less than this.
• At a minimum, 75% of the forgiveness amount must be attributable to Payroll Costs. Payroll Costs defined on second page.
• At a maximum, 25% of the forgiveness amount may be attributable to non-Payroll Costs, which are limited to:
  • Payments of mortgage interest on mortgage obligations incurred before February 15, 2020
  • Rent payments on leases dated before February 15, 2020
  • Utility payments under service agreements dated before February 15, 2020
    Important: It is the borrower’s responsibility to track and calculate Payroll and non-Payroll Costs.
• The amount forgiven may be reduced if:
  • your full-time employee headcount decreases. The amount of loan forgiveness will be reduced (but not increased) by comparing the number of full time employees (FTE) used for the loan amount calculation to the number of employees during the period when proceeds were used. Reduction would not be applied if the total number of FTE is restored before 6/30/20.
  • salaries and wages decrease by more than 25% for any employee making less than $100,000 annually. Reduction would not apply if the salary or wage is restored before 6/30/20.

Applying for Forgiveness:*

Current guidelines request the following information in the application for forgiveness:

• Documentation verifying the number of FTE on payroll and pay rates for the periods specified.
• Documentation demonstrating that proceeds were used for payroll:
  • Payroll tax filings
  • Including, State income, payroll and unemployment insurance filings
• Cancelled checks, payment receipts, or other documents on covered mortgage obligations, rent obligations and utility payments.
• Any other documentation deemed necessary by the SBA
• Certification by the authorized representative of the borrower that:
  • Documentation is true and correct
  • Amount for which forgiveness is requested was used for purposes eligible for forgiveness.
• A dedicated bank account for SBA PPP proceeds is not required by First Financial Bank

How do I calculate Payroll Costs? Current SBA guidance does not distinguish different calculations for payroll costs to qualify for a loan vs payroll costs to be forgiven.

Payroll Costs Include:

• Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee with a principal place of residence in the United States);
• Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
• State and local taxes assessed on compensation; and
• For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

Payroll Costs Excludes:

• Compensation from employees whose principal place of residence is outside of the US
• Compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessary;
• Federal employment taxes imposed or withheld between 2/15/20 and 6/30/20, including the employee’s and employer’s share of FICA and RRA taxes
• Other 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.

*Reminder: This information is currently not fully complete and requires additional SBA guidance. If funds are used for unauthorized purposes, you will have to repay those amounts. If you knowingly misuse them, you will be charged with fraud.