Paycheck Protection Program (PPP) Loan Forgiveness Resource Center

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.

PPP and Loan Forgiveness Guidelines Have Changed

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.

Start Gathering Your PPP Loan Forgiveness Application Documents

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:

The number of employees on your payroll, their pay rates, the IRS payroll tax filings, and state income, payroll and unemployment insurance filings
Payments on covered mortgage and lease obligations
Payments for utilities

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.

Resources and FAQs

How does PPP loan forgiveness work?

Your PPP loan will be forgiven if:

The loan proceeds are used to cover payroll costs, eligible mortgage interest, rent and utility costs over the 24-week period (Covered Period) after the loan is disbursed; and
Employee and compensation levels are consistent with pre-COVID figures.

How much of my PPP loan will be forgiven?

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:

Payroll costs (using the same definition of payroll costs used to determine loan eligibility)
Interest on mortgage obligations incurred in the ordinary course of business and in place before February 15, 2020
Rent on a leasing agreement in place before February 15, 2020

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.

What happens if all or some of my funds are not forgiven?

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.

What is my Covered Period?

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).

What if my payroll cycle doesn't line up with my Covered Period?

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.

How do I apply for loan forgiveness?

You must submit an application for forgiveness through the lender that is servicing the loan and provide:

Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and state income, payroll and unemployment insurance filings
Documentation verifying payments on covered mortgage obligations, lease obligations and utilities
Certification that documentation is true and correct, and that the amount that is being considered for forgiveness was used according to the PPP’s guidelines for use

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.

What forms do I need to verify payroll costs?

You’ll need to provide documentation verifying the eligible cash compensation and non-cash benefit payments during the covered period, including:

Bank account statements or third-party payroll-service provider reports documenting employee compensation
Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:

Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and
State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state

Payment receipts, canceled checks or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the borrower included in the forgiveness amount (PPP Schedule A, lines (6) and (7)).

What is included in payroll costs?

For a business with employees (including furloughed employees), payroll costs cover:

Salary, wages, commissions, bonuses or similar compensation up to $100,000
Payment of cash tips or equivalent
Vacation, parental, family, medical, or sick leave
Allowance for dismissal or separation
Group healthcare benefits (including insurance premiums)
Retirement benefits
State or local tax assessed on employees’ compensation (capped at $100,000)

What expenses do not count as payroll costs?

Payroll costs do not cover:

Taxes imposed or withheld under chapters 21, 22, and 24 of the Internal Revenue Code (IRC) during the lending period
Sick leave wages allowed under section 7001 and 7002 of the Families First Coronavirus Response Act (FFCRA)
Family leave wages allowed under section 7003 and 7004 of the FFCRA
Compensation for employees who live outside of the U.S.
Annual wages over $100,000 for any individual employee

What counts as an employee for forgiveness purposes?

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.

What if my employees do not want to come back?

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.”

Information current as of 6/29/2020. For complete information on the Paycheck Protection Program go to www.sba.gov.

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