Paycheck Protection Program Loan Forgiveness

Under the terms of the loan, up to 100% of your Paycheck Protection Program (PPP) loan is eligible for forgiveness if you meet certain criteria. The rules surrounding Paycheck Protection Forgiveness continue to evolve and it’s important that you stay up-to-date on the latest guidance by visiting the SBA and US Treasury websites.

The information below outlines how to apply for forgiveness, how to calculate the amount of the loan that can be forgiven and the documents you will need to submit to us to request loan forgiveness. For detailed questions about your business and PPP loan forgiveness, please contact your accountant or financial advisor. 

How do I request forgiveness?

Needham Bank is launching an online portal where you can apply for PPP loan forgiveness. Once the portal is ready, we will email you a secure link you can use to sign-in and complete your PPP loan forgiveness application.

What will I need to request forgiveness?

You will need to supply Needham Bank with documentation of your payroll expenses as well as mortgage interest, rent and utility costs from agreements dated before February 15, 2020. Once we receive your information, we will review and process your request for forgiveness based on the guidance established by the SBA. You will be notified of the decision after your completed submission is accepted and reviewed.

Some examples of documents you will need include:

  1. Form 941 (if you have employees) OR if you applied as a contractor, sole proprietor or partnership, 2019 1099-MISC forms OR Schedule C OR Schedule K-1 
  2. Payroll processor records or state unemployment insurance tax reporting forms
  3. Bank account statements 
  4. Documents showing employer contributions to employee health insurance, retirement plans or other costs eligible for forgiveness
  5. State quarterly business and individual employee wage reporting and unemployment tax filings
  6. Official/corporate documentary evidence of all costs for which you request forgiveness (for example, copy of company utility invoice and statement showing payments)
  7. Documents supporting any salary/wage reduction and job offer refusal calculations

How does the Forgiveness Portal Work?

We will guide you through a series of questions about your company, payroll and other allowable expenses. You will find helpful tips within the portal if you have questions.  We also have a Paycheck Protection Program Forgiveness Job Aide for reference as you complete the online application.

What conditions are required for forgiveness?

The full principal amount of a PPP Loan may be forgiven if the following conditions are met:

  • All loan proceeds were used for Forgivable Costs, and you used at least 60% for Payroll Costs, and not more than 40% for Non-Payroll Costs
  • All loan proceeds were used during the Covered Period or the Alternative Payroll Covered Period

Is there a “general rule” for when Payroll Costs or Eligible Non-payroll Costs are paid or incurred?

You should generally consider the following payments as eligible Payroll Costs or Eligible Non-payroll Costs:

  • Any Payroll Costs paid during the Covered Period or the Alternative Payroll Covered Period;
  • Any Eligible Non-payroll Costs paid during the Covered Period; and
  • Any Payroll Costs or Eligible Non-payroll Costs incurred during the Covered Period or the Alternative Payroll Covered Period but paid on the first regular due date thereafter

What are Payroll Costs?

Payroll Costs are salary, wages, tips, bonuses and hazard pay, commissions & tips, up to $100,000 of annualized pay per employee (including furloughed employees), as well as covered benefits for employees (but not owners) including health care expenses, retirement contributions, and state taxes imposed on employee payroll. At least 60% of your loan proceeds must be spent on Payroll Costs

What are Non-Payroll Costs?

Non-Payroll Costs include:

  • Payments for business-related interest on mortgages or other debit obligations (other than prepayments or principal payments) incurred before February 15, 2020
  • Payments for business-related rent on a leasing agreement dated before February 15, 2020, and
  • Payments for business-related utilities under service agreements dated before February 15, 2020, including gas, water, telephone, internet access, transportation

Up to 40% of funds may be spent on Non-Payroll Costs paid or incurred during the Covered Period or the Alternative Payroll Covered Period.

Please note that proceeds from any advance up to $10,000 on an Economic Injury Disaster Loan (EIDL) will be deducted from the loan forgiveness amount.

What is the Covered Period or the Alternative Payroll Covered Period?

The loan proceeds must have been spent and you must provide documentation for expenses during a certain part of the loan period in order to have the expenses forgiven. You can choose either:

  • The Covered Period, which starts on the day of funding of the loan and ends on either (i) for loans funded after June 5, 2020, up to 24 weeks or (ii) for loans funded before June 5, 2020, up to 24 weeks or 8 weeks

           OR

  • The Alternative Payroll Covered Period, which is the same as the Covered Period, except it starts on the first pay period following the actual funding date of the loan.  This time period may be helpful to use to line up with your payroll periods.   

Will my loan forgiveness amount be reduced if I don’t maintain my staff and payroll?

Yes. Your forgiveness amount may be reduced if the average weekly FTE during the Covered Period is less than its average FTE in 1) the period of February 15, 2019 through June 30, 2019, 2) the period of January 1, 2020 through February 29, 2020, or 3) in the case of seasonal employers, either of the preceding periods or a consecutive 12-week period between May 1, 2019 and September 15, 2019. You elect which period to use as its reference period. However, there are a number of exceptions. 

What are the exceptions or “safe harbors” to a reduced forgiveness amount due to reduction in headcount?

  • Exception 1: You reduced your FTEs but any reduction is restored on or before December 31, 2020;
  • Exception 2: You reduced your FTEs but you were unable to rehire employees back on or before December 31, 2020;
  • Exception 3: You reduced your FTEs but you are unable to return to the same level of business due to COVID restrictions on your business

Please note that any loan funds that are not forgiven will remain a loan at 1% interest and due either (i) within 24 months (if not extended) or (ii) for loans after June 5, 2020, within 60 months.  You must apply for loan forgiveness within 10 months of the end of the covered period.  If you do not, you will owe the full amount of the loan with interest.  You will be responsible for paying back any amount not forgiven by the SBA.

When can I apply for loan forgiveness or start making payments on a loan?

You can submit a loan forgiveness application any time on or before the maturity date of the loan – including before the end of the covered period – if you have used all of the loan proceeds for which you are requesting forgiveness.  If you have reduced any employees’ salaries or wages by more than the 25% allowed for full forgiveness, you must account for the excess salary reduction for the full eight-week or 24-week covered period, whichever one applies to the loan.  There is a “safe harbor” provision that allows you to restore salaries or wages by December 31, 2020 to avoid such a deduction in loan forgiveness.  If you want to take advantage of this safe harbor and meet the eligibility requirements, you may want to wait until you have been able to restore salaries or wages.  

If you are requesting loan forgiveness, payments will begin on the month after your forgiveness determination has been made, if a balance on the loan remains.  We will inform you of the first payment date.

Can I use all of my PPP funds for payroll?

Yes. You must use at least 60% of your PPP funds for covered payroll expenses in order to be eligible for 100% forgiveness and can use up to 100% for that purpose. If you use less than 60% of your PPP funds for covered payroll expenses, you may still be eligible for partial forgiveness.

I received an Economic Injury Disaster Loan Emergency Advance (EIDL). Does that impact PPP loan forgiveness?

Yes – the amount of your advance will be subtracted from the forgivable amount of your PPP loan.

I would like to be eligible for 24 weeks of forgiveness for eligible expenses, rather than 8 weeks. What do I need to do?

It’s easy – just select the 24 week option on the forgiveness application. 

Can I extend the maturity date on my loan to 5 years if I applied before June 5, 2020 when the Flexibility Act was signed?

PPP loan maturity dates can be extended by mutual consent between the borrower and the bank.  Borrowers who have 100% forgiveness will not need to extend the maturity date of the loan.  For that reason, any extension of maturity dates are to be requested after a forgiveness amount has been determined. 

If you have questions, please email [email protected] or call us during business hours at 781-474-5845.