Good news loan forgiveness is not going to run out!
Payments are now deferred until loan forgiveness is complete, interest will also be forgiven.
There is no SBA access yet - they were planning mid-august, but we are not convinced that we will have access even during August as the rules continue to change.
Businesses have the option to choose 8 weeks (if you received your loan prior to June 5, 2020) or 24 weeks for your loan forgiveness period, but the Covered Period may not extend beyond December 31, 2020. There is also an Alternative Covered Period, read more here
After filing your application, the bank has 60 days to review and ask for more documentation.
The SBA has 90 days to review and decide on the amount of loan forgiveness, during the 90 days no payments need to be made.
See Timeline below for an idea of how the process works
Source: First Republic Bank
Eligibility
To be eligible for 100% forgiveness of your outstanding loan, your Payroll costs must equal at least 60% of the PPP loan (a decrease from prior rule of 75%).
Non-Payroll costs cannot exceed 40% (such as rent, utilities & mortgage interest payments).
For Owner Pay they will base it on 2019 taxes.
Eligible Payroll costs and eligible Non-Payroll costs under the SBA’s current rules are summarized below:
Payroll Costs: Payroll costs include salary, wages, commissions or similar compensation; payments of cash tips; payments for vacation, parental, family, medical or sick leave; allowances for dismissal or separation; payments required for the provision of group healthcare benefits, including insurance premiums; payments of retirement benefits; and payments of state or local taxes assessed on employee compensation.
Furloughed employee payroll costs eligible: Note that, under the current SBA rules, salary, wages, commissions, or similar compensation paid to furloughed employees during the Covered Period are eligible for forgiveness, even if those employees are not able to perform their day-to-day duties.
Hazard pay and bonuses: So long as the employee’s total annualized compensation does not exceed $100,000, the SBA’s current rules provide that hazard pay and bonuses paid during the Covered Period (or the Alternative Payroll Covered Period) are eligible for forgiveness.
Exclude the following from payroll costs:
Compensation of an employee in excess of $100,000 annually (for a 24-week Covered Period, eligible compensation is capped at $46,154 per individual; and for an 8-Week Covered Period, eligible compensation is capped at $15,385 per individual);
Taxes under chapters 21, 22 or 24 of the Internal Revenue Code;
Any compensation of an employee who lives outside of the U.S.;
Qualified sick leave wages under §7001 of the Families First Coronavirus Response Act;
Qualified family leave wages under §7003 of the Families First Coronavirus Response Act.
Owner compensation: As further detailed in the Application and applicable PPP regulations, owner-employees, self-employed individuals and general partners may be eligible for forgiveness for applicable wages, commissions, income or net earnings from self-employment or similar compensation.
For a 24-week Covered Period this amount is capped at $20,833 for each individual or the 2.5-month equivalent of their applicable compensation in 2019, whichever is lower.
For loans made before June 5, 2020 and where the borrower elects to use an 8-week covered period, this amount is capped at 8/52 of 2019 compensation (up to $15,385 per individual).
No additional forgiveness is provided for retirement or health insurance contributions for self-employed individuals.
Rent or Lease Payments: Payments on business rent obligations under lease agreements existing prior to February 15, 2020 are eligible for loan forgiveness; however, lease payments and other eligible non-payroll costs may not exceed 40% of the loan forgiveness amount.
Utility Payments: Business utility payments for electricity, gas, water, transportation, telephone or internet access for which service began prior to February 15, 2020, are also eligible for loan forgiveness; however, utility payments and other eligible non-payroll costs may not exceed 40% of the loan forgiveness amount.
Mortgage Interest Payments: These costs consist of interest payments on business mortgage obligations you incurred in the ordinary course of business that (a) is your liability, (b) is a mortgage on real or personal property and (c) was incurred prior to February 15, 2020; however, mortgage interest payments and other eligible non-payroll costs may not exceed 40% of the loan forgiveness amount.
For more information, click to see the SBA PPP checklist on the First Republic Bank’s website
Source: First Republic Bank. They funded over 11,000 PPP loans. Thanks First Republic Bank of California for the guidance!
