5 Questions to Help You Through the PPP Loan Forgiveness Process

ppp loan forgiveness

4 min read

The Treasury and SBA are continually amending and clarifying their guidance on the Paycheck Protection Program loans. As more questions arise, they are releasing more answers.

This week they released a new FAQ, which provides a “safe harbor” for PPP borrowers of less than $2 million. This is excellent news, as it gives much more clarity on whether you should return your PPP funds or not — a very scary and confusing topic. Also, the deadline for returning your PPP funds in full has been extended to Monday, May 18th.

Similar to how complicated it was to determine eligibility and loan amounts, we anticipate there to be many challenges during the forgiveness phase since loan recipients are responsible for documenting and calculating their loan forgiveness amount according to the SBA rules and regulations.

While we are awaiting final guidance to be issued, we want to share some information that may help you as things stand now. Here are five questions and answers to help you through the loan forgiveness process.

PPP Loan Forgiveness: 5 Questions to Help You Through the Process

1. What should you be doing now to receive PPP loan forgiveness?

Our best advice during uncertain times like these is to document everything! As of now, the following information will be necessary to prove your loan forgiveness amount.

  • Documentation showing your average full-time equivalents for both your baseline period (either February 15, 2019 through June 30, 2019 or January 1, 2020 through February 29, 2020 — whichever is more favorable) as well as your eight-week covered period.
  • Documentation regarding covered mortgage interest payments, covered rent payments, and covered utility payments during the eight-week covered period.
  • Verification of payrolls, such as payroll summaries and federal payroll tax filings.
  • Proof of written offers to rehire employees who were laid off between February 15, 2020 and April 26, 2020. If any employee rejected their offer, we recommend keeping this on-hand as well.

2. Where can you look for guidance on the PPP loan forgiveness?

While we try to share timely updates with you all through our COVID-19 email blasts, it’s essential to check the guidance directly released by the SBA as they are continually pushing out new information. Be sure to check back regularly for updates.

3. Are you responsible for certifying the accuracy of the loan forgiveness amount? Or does that fall on your lender’s plate?

You are responsible for accurately documenting and verifying your loan forgiveness amount.

4. How is your loan forgiveness amount calculated?

To put it short, the amount of forgiveness will depend on how you spend your loan proceeds and how you keep your staff on board and pay them.

For more in-depth information, please see our blog post linked below. We also share examples to illustrate how the forgiveness calculations work.

Asking for Forgiveness: You've Been Approved for Your PPP Loan, Now What?

5. What can you expect if a portion of your loan is not forgiven?

After your eight-week covered period ends, you can prepay any unforgiven funds. If you cannot pay for the unforgiven portion at this time, interest will continue to accrue at 1%.

While interest payments can be deferred for six months, interest will still accrue. Any interest-only payments would reduce your accrual, and any unforgiven funds must be paid back within two years.

Further Guidance is Expected Soon

Again, we expect more guidance to be issued from the SBA in the coming weeks regarding the loan forgiveness process. As that is released, we will continue to share the most important details with you.

As always, we strive to make the complex simple for you during these extraordinary times. Please don’t hesitate to reach out to us if you have any questions along the way. We are here for you.

May 15, 2020