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PPP LOAN FORGIVENESS AND LOAN REVIEW

Your top questions and answers on the Small Business Administration's Paycheck Protection Program loan forgiveness process and loan review.

  • A27) Is the loan forgivable?

  • A29) Under what conditions would the loan not be forgiven by SBA?

  • A30) What risk does the lender incur if the borrower does not follow the PPP program’s criteria?

  • A48) How does the applicant consider federal payroll taxes when determining payroll costs to compute the maximum loan amount, allowable uses of the loan, and loan forgiveness?

  • A49) How does PPP loan forgiveness operate?

  • A72) What documentation will a self-employed individual be required to submit to the lender when requesting loan forgiveness?

  • A73) For self-employed individuals, what amounts are eligible for forgiveness?

  • A99) Will a borrower’s PPP loan forgiveness amount be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?

  • A118) Is the loan forgivable?

  • A121) When does the required twenty-four-week period begin that the borrower uses to determine their payroll costs?

  • A123) Under what conditions would the loan not be forgiven by SBA?

  • A124) Will SBA review individual PPP loan files?

  • A125) What is the general process to obtain loan forgiveness?

  • A126) When must payroll costs be incurred and/or paid to be eligible for forgiveness?

  • A127) For self-employed individuals, what amounts are eligible for forgiveness?

  • A128) Are salary, wages, or commission payments to furloughed employees; bonuses; or hazard pay during the covered period eligible for loan forgiveness?

  • A129) Are there caps on the amount of loan forgiveness available for owner-employees and self-employed individuals’ own payroll compensation?

  • A130) When must nonpayroll costs be incurred and/or paid to be eligible for forgiveness?

  • A131) Are advance payments of interest on mortgage obligations eligible for loan forgiveness?

  • A132) Will the loan forgiveness amount be reduced if the borrower laid-off or reduced hours of an employee, then offered to rehire that employee for the same salary and number of hours, or restore the reduction in hours, but the employee declines?

  • A133) What effect does a reduction in a borrower’s number of full-time equivalent (FTE) employees have on the loan forgiveness amount?

  • A134) What does “full-time equivalent employee” (FTE) mean and how should a borrower calculate its number of full-time equivalent (FTE) employees?

  • A135) What effect does a borrower’s reduction in employees’ salary or wages have on the loan forgiveness amount?

  • A136) How should borrowers seeking loan forgiveness account for the reduction based on a reduction in the number of employees (Section 1106(d)(2)) relative to the reduction relating to salary and wages (Section 1106(d)(3))?

  • A137) If a borrower restores reductions made to employee salaries and wages or FTE employees by not later than December 31, 2020, can the borrower avoid a reduction in its loan forgiveness amount?

  • A138) Will a borrower’s loan forgiveness amount be reduced if an employee is fired for cause, voluntarily resigns, or voluntarily requests a schedule reduction?

  • A139) What must borrowers submit for forgiveness of their PPP loans?

  • A140) What should a lender review in the PPP loan forgiveness application?

  • A141) What is the timeline for the lender’s decision on a loan forgiveness application?

  • A142) What borrower representations and statements will SBA review?

  • A143) When will SBA undertake a loan review?

  • A145) What should a lender do if it receives notice that SBA is reviewing a loan?

  • A150) When should a borrower’s EIDL loan be refinanced as part of its PPP loan?

  • A151) May fishing boat owners include payroll costs in their PPP loan applications that are attributable to crewmembers described in Section 3121(b)(20) of the Internal Revenue Code?

  • A152) May a fishing boat owner include as payroll costs in its application for loan forgiveness any compensation paid to a crewmember who received his or her own PPP loan and is seeking forgiveness?

  • Are payroll costs that were incurred during the covered period or the alternative payroll covered period but paid after the covered period or the alternative payroll covered period eligible for loan forgiveness?

  • A163) Are payroll costs that were incurred before the covered period but paid during the covered period eligible for loan forgiveness?

  • A164) Are borrowers required to calculate payroll costs for partial pay periods?

  • A165) For purposes of calculating cash compensation, should borrowers use the gross amount before deductions for taxes, employee benefits payments, and similar payments, or the net amount paid to employees?

  • A166) Are only salaries or wages covered by loan forgiveness, or can a borrower pay lost tips, lost commissions, bonuses, or other forms of incentive pay and have such costs qualify for loan forgiveness?

  • A167) What expenses for group health care benefits will be considered payroll costs that are eligible for loan forgiveness?

  • A168) What contributions for retirement benefits will be considered payroll costs that are eligible for loan forgiveness?

  • A169) How is the amount of owner compensation that is eligible for loan forgiveness determined?

  • A170) Are any individuals with an ownership stake in a PPP borrower exempt from application of the PPP owner-employee compensation rule when determining the amount of their compensation that is eligible for loan forgiveness?

  • A171) Are nonpayroll costs incurred prior to the covered period, but paid during the covered period, eligible for loan forgiveness?

  • A172) Are nonpayroll costs incurred during the covered period, but paid after the covered period, eligible for loan forgiveness?

  • A173) If a borrower elects to use the alternative payroll covered period for payroll costs, does the alternative payroll covered period apply to nonpayroll costs?

  • A174) Is interest on unsecured credit eligible for loan forgiveness?

  • A175) Are payments made on recently renewed leases or interest payments on refinanced mortgage loans eligible for loan forgiveness if the original lease or mortgage existed prior to February 15, 2020?

  • A176) Covered utility payments, which are eligible for forgiveness, include a “payment for a service for the distribution of . . . transportation” under the CARES Act. What expenses does this category include?

  • A177) Are electricity supply charges eligible for loan forgiveness if they are charged separately from electricity distribution charges?

  • A178) Are amounts attributable to the business operation of a tenant or sub-tenant of the PPP borrower or, in the context of home-based businesses, household expenses, eligible for forgiveness?

  • A179) Are rent payments to a related party eligible for loan forgiveness?

  • A180) If a seasonal employer elects to use a 12-week period between May 1, 2019 and September 15, 2019 to calculate its maximum PPP loan amount, what period in 2019 should be used as the reference period for calculating any reductions?

  • A181) Will a borrower be subject to a reduction to its forgiveness amount due to a reduction in FTE employees during the covered period if the borrower offered to rehire one or more laid off employees but the employees declined?

  • A182) In calculating FTE reduction exceptions in Table 1 of the PPP Schedule A Worksheet on the Loan Forgiveness Application (SBA Form 3508 or lender equivalent), do borrowers include employees who made more than $100k in 2019 (those listed in Table 2)?

  • A183) How do borrowers calculate the reduction in their loan forgiveness amount arising from reductions in employee salary or hourly wage?

  • A184) For purposes of calculating the loan forgiveness reduction required for salary/hourly wage reductions in excess of 25% for certain employees, are all forms of compensation included or only salaries and wages?

  • A185) What should a lender do if a borrower submits documentation of eligible costs that exceed a borrower’s PPP Loan Amount?

  • A186) If a borrower submits a timely loan forgiveness application, does the borrower have to make any payments on its loan prior to SBA remitting the forgiveness amount, if any?

  • A187) Can PPP lenders use scanned copies of documents, E-signatures, or Econsents for loan forgiveness applications and loan forgiveness documentation?

  • A188) When a borrower submits SBA Form 3508S or lender’s equivalent form, the lender shall:

  • A189) Should the lender report loan forgiveness to the IRS for loans forgiven under the PPP?

  • A190) What is the impact of SBA’s lien requirements on EIDL loans over $25,000 on a borrower’s ability to obtain other financing for business operations?

  • A191) SBA will deduct the amount of any EIDL advance received by a PPP borrower from the forgiveness amount remitted to the lender. How will a lender know the amount of the EIDL advance that will be automatically deducted by SBA?

  • A192) How should a lender handle any remaining balance due on a PPP loan after SBA remits the forgiveness amount to the lender?




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