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.

How do I determine whether I should use 8 weeks or 24 weeks when calculating Paycheck Protection Loan forgiveness?

The Payment Protection Program Flexibility Act of 2020 modified the Payment Protection Program (“PPP”) by including the new option to extend the forgiveness period from 8 weeks to the earlier of either 24 weeks or December 31, 2020.  Borrowers whose loan numbers were assigned after June 5 must use the 24 week forgiveness period.

This means that if you received your PPP loan on or before June 5, 2020, you now have the option of taking 24 weeks, or until the final cutoff date of December 31, 2020, to spend the funds of your PPP loan rather than just 8 weeks. In order to decide whether to use 8 weeks or 24 weeks when calculating your PPP loan forgiveness, it is helpful to understand the advantages of each.

Advantages of the 8-week forgiveness period:

  1. If you have spent all the funds of your PPP loan by the end of the 8 weeks, you can file for forgiveness earlier.
  2. You may have a decision faster about how much of your PPP loan will be forgiven.
  3. You may be able to maintain the number of employees or salaries of employees for a shorter time. 
  4. You can focus on running your business again.

Advantages of the 24-week forgiveness period:

  1. You have more time to spend the PPP funds that you need in order to obtain forgiveness. 
  2. You have more time to re-hire employees or increase salaries for employees who had their salaries reduced during COVID.
  3. Your business may have been slow, but is picking up after 8 weeks, so now you can spend the PPP funds.
  4. You use the 24-week forgiveness period, but you can apply before the end of the 24 weeks if you choose.
  5. You have more time to plan your forgiveness application or get professional advice.

Our online forgiveness portal will let you select either the 8 week or 24 week period and determine which is most beneficial to your business.

How do I know if I qualify for the EZ Form?

The Small Business Administration introduced a short, streamlined application for any business that meets JUST ONE of the following criteria:

  1. You’re a self-employed individual, independent contractor or sole proprietor who had no employees when you applied for your PPP loan OR
  2. The business did not reduce the annual salary or hourly wages of employees by more than 25%  AND didn’t reduce the number of employees or average employee paid hours during a certain period of time OR
  3. The business didn’t reduce salaries or hourly wages of employees by more than 25%  AND were unable to operate the business as prior to the loan due to COVID-related requirements

You must be able to certify to at least one of these statements to use the EZ Form, otherwise you will need to complete the full forgiveness application. This is just a general summary of the requirements; please click here to read the SBA guidelines in detail.

Our Online Forgiveness Portal will ask you a series of questions and determine whether you qualify for the EZ form, which greatly reduces the amount of information required to request forgiveness. 

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