Now that you have received your PPP (Payroll Protection Program) Loan you want to make sure you are keeping records to provide your loan provider and the SBA to take advantage of the loan forgiveness clause of the program. You will need to complete the Forgiveness Form and Instructions. You must submit this form within 10 months after the date your covered period ends.

There are some recent changes to the program due to passage by the Federal Government of the “Paycheck Protection Program Flexibility Act”.

Highlights of the PPP Flexibility Act are:

  • Extends the “covered period” from 8 weeks of your application date to 24 weeks or December 31, 2020.
  • Increases from 25% to 40% the use of PPP funds for nonpayroll expenses, such as rent, mortgage interest and utilities (lowering the 75% requirement for payroll expenses to 60% to get maximum loan forgiveness).
  • Extends the loan term for any unforgiven portion from 2 years to 5 years.
  • Extends the period for when a business can apply for loan forgiveness, from within six months to within 10 months of the last day of the covered period, before it must start making interest and principal payments.
  • Remove the limits on loan forgiveness for small businesses that were unable to rehire employees, hire new employees or return to the same level of business activity as before the virus.
  • Give small businesses more time to rehire employees or to obtain forgiveness for the loan if social-distancing guidelines and health-related actions from the Centers for Disease Control and Prevention or other agencies prevented the business from operating at the same capacity as it had before March 1.

However, you can prepare now to pull together the information you will need to complete the PPP Forgiveness Application.

Required Records to Verify Loan Forgiveness

  • Payroll Records for the covered period
    • Gross salary: wages, paid time off, and. Hourly wages
  • Benefits Paid
    • Employer contributions for retirement plans
    • Health insurance paid for employees
  • Calculate your average full-time equivalency (FTE) for the covered period
  • Documentation verifying eligible non-payroll expenses:
    • Business rent or lease payments or business-related mortgage interest payments
    • Business utility payments (electric, gas, phone, internet, etc.)
  • If you received the EIDL (Economic Injury Disaster Loan), you will need to reduce the amount of your forgiveness by the amount of the EIDL advance that you received.

If you had a reduction in wages or staffing, you will still be allowed to count that employee’s FTE at their previous level if you meet the following conditions, referred to as the “Safe Harbor” exception.

  • The employee declined a good faith offer to return (this may impact their eligibility for the unemployment they have collected)
  • The employee was terminated for good cause
  • The employee resigned
  • The employee voluntarily requested a reduction in hours (often due to childcare needs)

Submitting your PPP Loan Forgiveness Application

It is recommended to hold off on submitting this form as it is expected there will be additional changes and clarifying guidance over the next few weeks. The form will be submitted to the SBA through your lender.

Any amount that is not forgiven will be converted to a five-year loan payable to the SBA at 1%. At this time, monthly payments on balance due are slated to begin in December of 2020. This may be revised in future updates. The information for this article was drawn from Wegner CPA’s. Wegner provides accounting, financial and tax expertise. They provide many of their resources for no fees. You can download the full webinar and/or the power point and sample spread sheets. You may want to sign up for their free monthly newsletter that always has helpful accounting tips and resources for small businesses.

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About the Author

Jenny Hahn has served as the JVA Executive Director since 2010. She co-founded Milwaukee Sting VBC in 1989 serving as director, head coach and board member through today. She served as Operations Director and then Executive Director of Badger Region Volleyball Association from 1998-2010. Jenny is passionate about junior volleyball and sees the JVA as a vehicle to improve the junior club experience for club directors, coaches and the club member families.