CWG Insight Series: Preparing for PPP Loan Forgiveness
Crown business owners,
Many of you are most likely nearing the end of your PPP loan spend and are starting to think about getting the loan forgiven. While the process for obtaining the loan was chaotic, confusing and stressful, it looks like the forgiveness process should be much easier. Most banks are working on a fully electronic submission and many have indicated they will be ready to start accepting forgiveness applications in August. Once you fully spend your PPP money, please contact your lender for their bank specific instructions on how to submit for forgiveness.
As a quick update, you now have 24 weeks, or a deadline of 12/31/2020, whichever comes sooner to spend your PPP loan money. At least 60% of the loan must be spent on payroll costs, including wages, company paid health insurance premiums, company paid retirement match and any state/local taxes like unemployment insurance. The maximum amount of forgivable wages for any one employee over the 24 week period is $46,154. For an owner, the max is $20,833. Up to 40% of the loan can be spent on rent, utilities and business mortgage interest.
There are two versions of the SBA forgiveness applications and my assumption is most of you will complete the EZ form – which is pretty easy! This is over simplifying it and we should look carefully at your specific situation but you are able to use the EZ form if you did not reduce the annual salary or hourly wages of any employee by more than 25 percent during the covered period AND you did not reduce the number of employees or the average paid hours of employees OR you were unable to operate during the Covered Period at the same level of business activity as before February 15, 2020, due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.
EZ Application: https://home.treasury.gov/system/files/136/PPP-Forgiveness-Application-3508EZ.pdf
EZ Application Instructions: https://www.sba.gov/sites/default/files/2020-06/PPP%20Loan%20Forgiveness%20Application%20Form%20EZ%20Instructions%20%28Revised%2006.16.2020%29-508.pdf
If you are unable to certify to the conditions above, you will be required to submit a much longer, more detailed application and we’ll need to talk more specifically about your individual situation.
In addition to the application, there are required documents you will need to collect to provide with your PPP forgiveness application and you specific lender may have additional requirements. These include:
- Documents verifying the number of full-time equivalent employees on payroll and their pay rates, for the periods used to verify you met the staffing and pay requirements:
- Payroll reports from your payroll provider
- Payroll tax filings (Form 941)
- Income, payroll, and unemployment insurance filings from your state
- Documents verifying any retirement and health insurance contributions
- Documents verifying that your eligible interest, rent, and utility payments were active in February 2020
- Documents verifying your eligible interest, rent, and utility payments (canceled checks, payment receipts, account statements)
Good record keeping and bookkeeping will be critical for getting your loan forgiven—you’ll need to keep track of eligible expenses and their accompanying documentation over the 24 weeks. Your lender will likely require these documents in digital format, so take the time to scan any paper documents and keep backups of your digital records.
Furthermore, your business will need to have complete financial statements at the end of your fiscal year. Your lender and the SBA have the right to request and audit your business’s financial documents and records.
More to come on this as the banks release their forgiveness process but please be sure to spend within the guidelines and keep detailed records so we can get your loan fully forgiven.