Working with our relationship management team, ECCU’s partner Kabbage® has helped many of our members apply for and receive Paycheck Protection Program (PPP) loans. If you received a PPP loan, now is the time to begin preparing your loan forgiveness application. Our partnership with Kabbage® continues, and we’re here to help you with your application.
The Small Business Administration’s (SBA) PPP loan forgiveness guidelines have changed. Changes range from how much time you have to spend the funds and how you spend them; to when and whether you need to rehire laid-off staff or fill vacant positions. You can learn more about these guideline changes here.
Since the time to submit your PPP loan forgiveness application (which you must do through Kabbage®, the lender servicing your loan) has arrived, you’ll want to gather documents that verify the following:
You’ll also need to certify that the documents you submit are true and correct and that the amount being considered for forgiveness was used according to PPP guidelines.
To learn more about preparing and applying for PPP loan forgiveness, visit here.
Your PPP loan will be forgiven if:
The amount of your loan that is forgiven is equal to the amount you spend toward eligible expenses during the 24 weeks following loan disbursement, including:
Forgiven amounts will not be considered a cancellation of debt (COD) for federal tax purposes, meaning business owners will not need to claim PPP loan amounts in their 2020 income tax filings. Also, no tax deductions will be allowed for expenses that are forgiven under PPP.
Loan amounts not forgiven will become a two-year loan (or five-year if approved after June 4) with a 1% interest rate and no prepayment penalties or fees. Payments are deferred for the first six months after the loan is disbursed.
The covered period starts on the date your PPP loan is disbursed and runs for up to 24 weeks (based on how long of a period you want to use to calculate your forgiveness amount) or until December 31, 2020 (whichever is first).
You can calculate your payroll costs based on the period beginning on the first day of the first pay cycle following your loan disbursement date (for pay cycles that are biweekly or more frequent). This is referred to as the Alternative Covered Period. All other eligible costs must be calculated based on the date your PPP loan was disbursed.
You must submit an application for forgiveness through the lender that is servicing the loan and provide:
The lender has 60 days from receipt of a completed application to submit a decision to the SBA.
You’ll find the SBA’s PPP latest loan forgiveness application here.
You’ll need to provide documentation verifying the eligible cash compensation and non-cash benefit payments during the covered period, including:
For a business with employees (including furloughed employees), payroll costs cover:
Payroll costs do not cover:
Any employee who is full-time, part-time, furloughed, or on a paid internship, and yourself if you receive a W-2 with amounts withheld for taxes.
Do not include freelancers, independent contractors, unpaid interns, unpaid volunteers or employees who live outside of the US.
The SBA and Treasury have issued preliminary guidance on this issue. If you laid off an employee, then offered to rehire the same employee for the same salary or wage and number of hours, but they declined the offer, your loan may still be forgiven for the full amount.
If this instance occurs with your business, the SBA and Treasury have set expectations that these interactions must be well-documented. You “must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented.” While we await final guidance from the SBA, they also note that “employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.”
For more information, review this Ultimate guide to PPP loan forgiveness.
Information current as of 6/29/2020. For complete information on the Paycheck Protection Program go to www.sba.gov.
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