Local business is the lifeblood of our communities. As part of our unique, caring LifeDesign banking approach, Fidelity Bank cares deeply about the health and well-being of our area businesses and communities.
To aid our clients, and all our fellow small businesses, in planning for these proceeds we have developed the following Paycheck Protection Program (PPP) loan forgiveness FAQs. We hope these help bring you the clarity you need to make important decisions with more confidence.
PPP Forgiveness FAQs
Updated as of May 15, 2020.
What may be forgiven?
SBA may forgive payments of principal and interest on a PPP loan equal to the amount of proceeds used for “forgivable purposes” during the 8 weeks from the date of your loan. Qualifying expenses include:
- payroll costs
- additional wages you pay to formerly tipped employees who no longer receive tips
- self-employed owner compensation replacement
- based on 2019 Form Schedule C profit, capped at $100,000
- interest on certain mortgages
- rent on certain lease agreements
- utility payments
How much may be forgiven?
Your loan forgiveness will be based on the amount you spend on any of the following items during the 8-week period (beginning on the funding date of your PPP loan):
- payroll costs
- for employees earning $100,000 or less – excludes self-employed owners
- self-employed owner compensation replacement
- 8-weeks of Schedule C profit, subject to $100,000 cap
- interest on certain mortgages*
- mortgage obligation incurred before 2/15/2020
- rent on a certain lease agreements*
- lease dated before 2/15/2020
- utility payments*
- service agreement dated before 2/15/2020
*For self-employed borrowers, expenses are allowed to the extent that they are deductible on 1040 Form Schedule C.
Note: Payroll costs must be at least 75% of total forgivable expenses. If you used more than 25% of your loan proceeds on non-payroll costs your maximum forgivable amount will be equal to payroll costs divided by 0.75.
Your forgiveness amount may also be reduced if you have a lower number of employees, or if you reduce your employees’ wages by 25% or more, from what they were during the same period a year ago or an early “pre-COVID” period in 2020.
If you received an advance under the SBA’s Economic Injury Disaster Loan Program (EIDL), the amount of the advance will be subtracted from the loan forgiveness amount.
What if I rehire employees?
PPP is intended to encourage you to maintain or quickly rehire employees. Forgiveness reductions, due to a reduction in headcount or wages, can generally be avoided if the wages are restored or the employee(s) are rehired by June 30, 2020.
If you laid off an employee, then offered to rehire the same employee (for the same salary or wage and number of hours), but the employee declined the offer, the amount of forgiveness related to this employee may still qualify for PPP Loan forgiveness. It is important to document this through a written offer and rejection from the employee. Both employees and employers should be aware that employees that reject an offer for re-employment may forfeit eligibility for continued unemployment benefits. Refer to Question 40 in the SBA FAQs below.
What else should I consider?
On May 13th, the SBA further clarified the issue regarding the need for PPP borrowers to certify in good faith that current economic uncertainty makes the loan request necessary to support the ongoing operations of the applicant. Question 46 in the SBA FAQs clarifies that 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. Question 47 extended the repayment date for the safe harbor to May 18, to give borrowers an opportunity to review and consider Question 46.
Previous questions 31, 37, and 43 originally outlined the eligibility certification. These included the announcement that eligibility certification will be retroactively applied and companies with existing PPP loans who determine their business activity or access to other sources of liquidity is sufficient to support their ongoing operations in a manner not significantly detrimental to the business, can return the loan full prior to May 14th (now extended to May 18th). Correspondingly, the Treasury announced borrowers seeking forgiveness on loans in excess of $2 million would be subject to a full audit to show how funds were used and how their good faith certification of eligibility was derived.
Refer to Questions 31, 37, 43, 46, and 47 in the SBA FAQs below for more detail.
For more detailed information please consult the links below:
SBA’s PPP Webpage
SBA’s PPP FAQs for Lenders & Borrowers
PPP Interim Final Rule
Please note, these FAQs are offered as a planning tool and for informational purposes only. They are based on the most current information we have from the SBA, which may change as the SBA has indicated that further guidance on forgiveness is forthcoming. No specific guidance on forgiveness has been established at this time. Several alternatives are being considered. We know there are still many questions about how the process will work and what supporting documentation will be required. As we learn more, and as additional guidance comes out, we will update this resource page accordingly. FAQs are not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.
We like to commend all of our vital community businesses for your commitment to your employees and your resilience through this time. We at Fidelity Bank continue to be inspired by the hundreds of local businesses our CARES Act Support Team has worked with so far, and the thousands of local employees who will benefit from this relief effort. We’ll continue to work hard for our clients and the members of our communities. Learn more about the PPP program by visiting the SBA website.
To inquire about working with Fidelity Bank, contact our CARES Act Support Team at CARESActSupportTeam@fidelitybankonline.com.