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Paycheck Protection Program Forgiveness

By: Chris Ferris

Paycheck Protection Program Forgiveness

Now that you've received funding from your Paycheck Protection Program (PPP) loan, you might be wondering what happens next.  One of the benefits of the PPP is that your loan can be forgiven if the proceeds are used for covered purposes so long as employee headcount and compensation were also maintained during the covered period.

At this time, the SBA has not issued final guidance on all the details surrounding PPP loan forgiveness. There are questions that still need to be answered and you can be assured that your bankers are seeking clarity. However, we wanted to take the opportunity to remind you of some key points as we understand them today, May 8th, 2020.

Note: PPP forgiveness criteria may change during your 8 week covered period. Fidelity Bank will follow the protocol set forth by the SBA as it pertains to your PPP Loan.  

The SBA recently clarified that the 8-week period begins on the date you received the disbursement of the loan. The CARES Act states that during your 8 week period the sum of the following costs incurred and payments made will be eligible for forgiveness:

  • Payroll costs
  • Any payment of interest on any mortgage obligation (not including any prepayment of or payment of principal on a mortgage obligation) that was incurred before February 15, 2020,
  • Any payment of rent under a leasing agreement in force before February 15, 2020,
  • Any utility payment, including payment for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020.

In recent guidance, the SBA stated that no more than 25% of the forgivable amount of a PPP loan can be attributable to non-payroll costs.  Payment is deferred for 6 months on your PPP loan. Any portion of a PPP loan that isn’t forgiven must be repaid over the remaining 18 months at an interest rate of 1%.

Since information and guidance on PPP loan forgiveness is still evolving, we are encouraging our clients to visit the Department of the Treasury website for the latest information. Click HERE. Your lender will be in touch with you closer to the end of the 8 week period to discuss next steps. We expect some or all the following documentation will be necessary to process the forgiveness:

Quarterly IRS forms 940, 941, or 944 for the following dates:

  • 3/31/19 and 6/30/19
  • 3/31/20 and 6/30/20

Documentation in the form of canceled checks, payment receipts, and bank statements showing payment of the following items from 2/15/20 to 6/30/20:

  • Mortgage Interest
  • Rent Payments
  • Utilities

Thank you for choosing Fidelity Bank as your PPP loan provider.  If there is anything additional Fidelity Bank can do to help you and your business through this difficult time please let us know. We are Here for You and Here for Good.