As the COVID-19 pandemic has shut down much of the United States economy the Federal Government has made several relief programs available to those that have suffered economic harm. The one that is most popular is the Small Business Administration’s Paycheck Protection Program (PPP) that began in early April. The initial money ran out quickly, and the program was resumed April 27th after additional funding was approved by Congress.
One of the most attractive features of the PPP is that the funds received may qualify for loan forgiveness if the rules are followed.
Here are some important things to know about the PPP for those that do not want to pay the money back:
What can I use these loans for?
You should use the proceeds from these loans on your:
- Payroll costs, including benefits;
- Interest on mortgage obligations, incurred before February 15, 2020;
- Rent, under lease agreements in force before February 15, 2020; and
- Utilities, for which service began before February 15, 2020.
The loan amounts will be forgiven as long as:
- The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the eight-week period after the loan is made; and
- Employee and compensation levels are maintained.
How much of my loan will be forgiven?
You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the eight weeks after getting the loan. At least 75% of the amount borrowed must have been used for payroll costs.You will also owe money if you do not maintain your staff and payroll.
- Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
- Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
- Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
How can I request loan forgiveness?
You can submit a request to the lender that is servicing the loan in writing. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on forgiveness within sixty days.