If your small business received a Paycheck Protection Program (PPP) loan, your next step is preparing for forgiveness of your loan. Loan forgiveness is not automatic. You must apply for forgiveness, and there are a number of requirements.
What expenses qualify for PPP loan forgiveness?
This program is intended to help small businesses keep employees on payroll. According to the SBA, your North Cascades Bank PPP loan may be forgiven if the proceeds are used for qualified expenses during the 24-week period (previously 8-weeks) after the funds are received.
- 60% of the loan amount must be used for payroll costs. These include:
- Employee salaries, including bonuses and hazard pay - salary cap is $100,000 per employee.
- Group health care benefits, retirement benefits, and state/local taxes on employee salaries.
- No more than 40% of the loan amount can be used for non-payroll costs in place prior to February 15, 2020. These include: mortgage interest, rent and utilities. No advance payments of interest on mortgages will be eligible for loan forgiveness.
Preparation for PPP loan forgiveness
To prepare for the documentation requirements that come with applying for loan forgiveness, you will need to keep detailed payroll and expense records. Proof of these qualified expenses will need to be provided for your loan to be considered for forgiveness. If you don't already, you may consider working with a tax professional or CPA for help with record-keeping. The following actions may help increase the likelihood of forgiveness after the 24-week period (previously 8-weeks):
- Keep the PPP funds separate: Consider putting the loan into its own designated account to better keep track of the funds.
- Keep disciplined records: Create account codes or sub-codes so there’s an organized paper trail for qualified expenses.
- Keep supporting documents: Stay organized with your documentation of PPP fund usage - especially for payroll, interest, rent, and utilities payments.
- Payroll: Retain payroll registers and proof of ACH transfers. If you outsource to a professional employer organization (PEO), save your payroll invoice that shows payroll costs and employee benefits.
- Utilities: Keep invoices and statements for electric, gas, water, phone, internet and transportation. Gather documents showing that utility agreements were in effect prior to February 15th, 2020.
- Rent and mortgage interest: Keep proof of payments (cancelled checks, ACH records, etc.).
Note: The SBA has stated that borrowers must retain PPP documents for at least six years after the date the loan is forgiven or paid in full.
When can borrowers apply for forgiveness?
On Thursday, July 23rd additional information was released from the SBA regarding the PPP Forgiveness Process. We were informed that the SBA will begin accepting Forgiveness Applications on August 10th. Currently it is still unknown what the submission process will entail, and we are awaiting additional information.
Additionally, it is expected that over the next couple of weeks we will see legislation pass that will automatically forgive PPP loans under a certain dollar amount. It is also expected that the Forgiveness Application and documentation will change once again. Given these pending changes and timelines, North Cascades Bank will discontinue receiving applications for forgiveness at this time. We will continue to communicate updated information to our customers as information is released by the SBA.
Please continue to visit our website for additional information and updates. If you have questions regarding PPP Loan Forgiveness, please email us at: firstname.lastname@example.org.
How long will the forgiveness process take?
Within 60 days of receiving your application, we will review your calculations, documentation and forgiveness amount requested, and submit your application to the SBA. The decision for full or partial PPP loan forgiveness is at the discretion of the SBA.
Frequently Asked Questions (FAQ) on PPP Loan Forgiveness
Click here for a list of questions and answers provided by the SBA about PPP Loan Forgiveness.
Be sure to check this page frequently, as the latest information and guidance is released by the SBA, we will update our website in addition to communicating with our PPP customers directly via email.
We will also continue to help customers navigate other SBA options, additional credit options, as well as payment deferral options.