clarity and confidence banner

PPP Forgiveness

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.

On June 5, the Payroll Protection Program (PPP) Flexibility Act was passed into law. Key changes include: extension of the coverage period from 8 weeks to 24 weeks; reduction in the amount require to be spent on payroll from 75% to 60%; and the extension of the employee rehire period from June 30th to December 31st.  The SBA has also issued two new Forgiveness Applications including a new EZ Form. Fidelity Bank clients seeking loan forgiveness will apply within our secure online portal which we are working to incorporate the updated guidance and EZ Form. In the meantime, to help you prepare we recommend borrowers review the SBA paper application and instructions at the links below.

PPP Forgiveness FAQs

Updated as of June 19, 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 coverage period. 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 coverage 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.

Coverage Period is either 24-weeks beginning on the PPP Loan Disbursement Date, or if this date is prior to June 5, the borrower can elect to use an 8-week period.

Payroll Costs must be at least 60% of total forgivable expenses. If you used more than 40% of your loan proceeds on non-payroll costs your maximum forgivable amount may be equal to payroll costs divided by 0.60.

Employee/Wage Reductions: 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.

EIDL Advance: 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 December 31, 2020.

The PPP Flexibility Act allows borrowers two safe harbors.  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. Also, if the borrower is unable to operate during the coverage period at the same level of activity as before due to compliance with Covid-19 restrictions or requirements, they may be exempt from the reduction.
For more detailed information please consult the links below: 
SBA’s PPP Webpage
SBA’s PPP Loan Forgiveness Application
SBA’s PPP Loan Forgiveness Application Instructions
SBA’s PPP EZ Loan Forgiveness Application
SBA’s PPP EZ Loan Forgiveness Application Instructions
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 [email protected].