PPP Loan Forgiveness: Calculator and FAQs

Posted by Employer Flexible on May 14, 2020
Employer Flexible

As of May 6, more than 2.4 million loans worth more than $183 billion have been approved as part of the second round of funding for the Paycheck Protection Program (PPP). Whether you have already received funding following your application for the PPP, or are still waiting to hear back regarding approval for a loan, you may have questions about loan forgiveness. Below are responses to frequently asked questions on this issue.

We are also including a link to download a helpful PPP Loan Forgiveness Estimator Tool to help you better understand what part of your PPP loan may be forgiven. Just enter your loan information into the boxes beginning with cell B29 of the spreadsheet to get started.

Note that this information is regularly being updated and is current as of May 13, 2020. For the most up-to-date information regarding PPP loans, visit the U.S. Small Business Administration (SBA) website.

PPP Loan FAQ's

When may I request Loan Forgiveness? 

You may submit a Loan Forgiveness request to the Bank after the Covered Period, however, the SBA may set or limit the time frame during which you may submit a Loan Forgiveness request. The SBA will likely provide specific forms to use when applying for forgiveness and we will provide further information on the process for forgiveness as soon as possible.

How may I obtain Loan Forgiveness?

While the SBA has yet to finalize its requirements, you must:

  • Request loan forgiveness;
  • Submit documentation in support of your request; and
  • Certify that (i) such documentation is true and correct and (ii) the amount for which forgiveness is requested was used to retain employees and make payments on eligible costs.

What can I do now to prepare a Loan Forgiveness request?  

We recommend that you:

  • Track your eligible payroll costs and other covered expenses; and
  • Gather documentation to verify (i) the number of full-time equivalent employees and their pay rates and (ii) payments of eligible payroll costs and the cost of eligible mortgage interest, rent, and utilities.

Could the SBA reduce the amount of Loan Forgiveness?        

Yes. Forgiveness is based upon maintaining or quickly rehiring employees and salary levels. So, your Loan Forgiveness amount may be reduced if your full-time headcount declines or if salaries and wages decrease.

What if my loan is not completely forgiven?

You will be responsible for repayment of loan amounts that are not forgiven by making monthly payments to your lender in accordance with the terms of your note.

Do you expect the SBA to issue additional program rules or other guidance? 

Yes. We expect continued guidance from the SBA and such additional guidance may change the requirements for Loan Forgiveness. The information presented here is based on what we know today. The SBA’s current FAQs can be accessed at SBA FAQs

Could the SBA review my Paycheck Protection Program loan files?

Yes, the SBA has indicated that it will review the eligibility of all Paycheck Protection Program loans in excess of $2 Million and other Paycheck Protection Program loans as it deems necessary and appropriate following the submission of Loan Forgiveness requests.

How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?

When submitting a PPP application, all borrowers must certify in good faith that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness.

What tax implications should I be aware of regarding PPP loan forgiveness? If my PPP loan is forgiven, will I have to pay taxes for the loan?

Guidance on this issue is still developing. The CARES Act states that a forgiven PPP loan will not be considered taxable income to the small business. However, the IRS recently issued Notice 2020-32, which outlines the IRS's interpretation that current tax rules allow them to tax small businesses on their PPP loan forgiveness amount. There are already bipartisan bills pending in Congress to overrule the IRS interpretation, and leading lawmakers on the Senate Finance Committee and the House Ways and Means Committee have been working with the IRS to try to correct the guidance so that a bill would become unnecessary. To learn more about the status of these ongoing legislative actions, we recommend you contact your federal elected official(s).

For additional questions regarding PPP loans, we encourage you to visit the SBA website or contact your Employer Flexible HR Consultant.

Topics: small business