Guidance for Paycheck Protection Program (PPP) Loan Forgiveness

Written by Emily Liu

On May 29, 2020

The first group of the Paycheck Protection Program (PPP) loan recipients is about to finish their eight-week loan coverage period. On May 15, the Small Business Administration (SBA) released a long-awaited application to let borrowers make filing for forgiveness on their PPP loan. To provide additional guidance on how to obtain complete forgiveness on a PPP loan, the SBA issued an updated Interim Final Rules on May 22. The following are some highlighted key points from the rules, which show borrowers the requirements of PPP loan forgiveness.

Use 75% of the Borrowed Funds on Payroll

The purpose of the PPP loan is to ensure that workers can be employed and paid during the COVID-19 hardship period. To obtain complete forgiveness, borrowers must provide documents to prove that they are using at least 75% of the funds on their payroll expenses. For the other 25% of the funds, the borrower should use it to cover rent, mortgage interest, or utilities.

Eight Week Forgiveness Period

Costs incurred over eight weeks after borrowers receive the PPP loan will be eligible for forgiveness. It doesn’t matter whether the company’s actual payout date is within the eight weeks or not. As long as the employment payroll incurs during the eight weeks, the expense will be forgivable. Banks must make the funds available for borrowers in ten calendar days after the loan is approved. And the eight week period starts when lenders make the disbursement of the PPP loan.

Maintain the Employees Number and Salary

Borrowers should ensure that they maintain the number of employees during the eight-week loan coverage period. They also need to preserve employees’ salary levels. All employees must get paid for more than 75% of the salary they received during the most recent quarter. If the company laid-off workers or put workers on furlough, it needs to rehire staff to make the company payroll amount equal to or above the 2019 average payroll upon which the loan amount is based. There is a grace period for rehiring and payment reinstatement. Companies must meet these criteria until June 30, then they can apply for forgiveness after this date.

Provide Enough Documents

Borrowers need to provide documentation to prove that they spent the PPP loan according to the requirements. For payroll, companies can reach out to payroll providers, such as Insperity, to get reports of payroll statements. If a company spends the PPP funds on other approved expenses like rents or mortgage interest, they must provide documentation like bank transfers or canceled checks to prove that their expenses meet the criteria. Borrowers can also put the PPP loan into a separate account. In this way, it would be more convenient to calculate the costs and prepare the documents.
Small business owners can use the Celeri Network PPP loan forgiveness calculator to find out how much of their loan can be forgiven.

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