Paycheck Protection Loans

Posted on 5/20/2020

 

Applying for a Paycheck Protection Loan

Due to the high volume of loan requests we received from the Small Business Administration’s Paycheck Protection Program, we are not accepting new applications.

Paycheck Protection Forgiveness

Under the terms of the loan, up to 100% of your 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 latest guidance by visiting the SBA and US Treasury websites.

The information below outlines 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 paycheck protection loan forgiveness, please contact your accountant or financial advisor. 

How do you calculate the amount of the loan that will be forgiven?
According to an Interim Final Rule (IFR) as of April 2, 2020, the amount of your paycheck protection loan that may be forgiven by the Small Business Association (SBA) is determined by the following:

  • 100% of funds must be spent on eligible expenses over the 8 week period:
    • Following the funding date of the loan OR
    • The first pay period following the actual funding date of your loan 
  • At least 75% of funds must be spent on payroll costs (including salary, wages & tips, up to $100,000 of annualized pay per employee (a maximum of $15,385 per employee for 8 weeks) as well as covered benefits for employees (but not owners) including health care expenses, retirement contributions, and state taxes imposed on employee payroll)
  • Up to 25% of funds may be spent on non-payroll costs paid or incurred during the 8 week period including:
    • 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

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.

You will be responsible for paying back any amount not forgiven by the SBA. Under the terms of the agreement, you will have 24 months from the date of funding to pay back the loan.

Will my loan forgiveness amount be reduced if I don’t maintain my staff and payroll?
Yes. Your forgiveness amount may be reduced if you decrease your full time employee headcount or decrease salaries and wages by more than 25% for any employee that made less than $100,000 in 2019.  

The reduction in headcount is calculated using the average weekly number of full-time equivalent employees (FTEs) you employ during the 8 week period after funding and determining if it is less than the average number of FTEs per pay period between one of the following periods:

  • February 15, 2019 and June 30, 2019 OR
  • January 1, 2020 and February 29, 2020 OR
  • For seasonal employees, either of the time periods above, or a consecutive twelve-week period between May 1, 2019 and September 15, 2019

There are two “safe harbor” exceptions to these calculations:

  1. The first exception removes an employee from the FTE calculation if the employee refused a qualified offer of employment for the same hours at the same rate and no replacement employee was hired
  2. The second exception applies if full time employment and salary levels for changes made between February 15, 2020 and April 26, 2020 have been restored by June 30, 2020  

How do I 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. We will email you again to let you know how to submit your information in the coming weeks.  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. Borrower certification of documentation (we will post this form to our website when it is available)
  2. Form 941 (if you have employees)
  3. Payroll processor records for the 8 weeks or state unemployment insurance tax reporting forms
  4. 2019 Form 1040 Schedule C (if not already submitted)
  5. Official/corporate documentary evidence of all costs for which you request forgiveness (for example, copy of actual utility bill, not a list of expenses)
  6. Documents supporting any salary/wage reduction and job offer refusal calculations

For information on your Paycheck Protection Program loan, please email us at
paycheckprotectionprogram@needhambank.com.