PPP Loan Forgiveness Information
We are proud to have helped support so many local businesses with SBA PPP loans and look forward to assisting you navigate the forgiveness process.
In June, the SBA provided additional guidance which impacted the forgiveness part of the process. We continue to monitor Congress and the SBA for updates and the formal implementation of the PPP Flexibility Act of 2020. We will notify applicants of any additional changes and incorporate them into our process.
We have launched an online portal to help you navigate the PPP forgiveness process. Clients will receive an email invite with the necessary information and instructions to apply for forgiveness.
Obtaining the loan is just the first step. PPP loans can potentially be forgiven in-part or in-full.
The program dictates that loan amounts will be forgiven as long as:
- The loan proceeds are used to cover payroll costs, and most mortgage interest, rent and utility costs over the forgiveness period after the loan is made; and
- Employee and compensation levels are maintained.
To be eligible for loan forgiveness, funds from your PPP loan can be used for the following purposes:
- Payroll: salary, wage, vacation, parental, family, medical, or sick leave, health benefits
- Mortgage interest: as long as the mortgage was signed before February 15, 2020
- Rent: as long as the lease agreement was in effect before February 15, 2020
- Utilities: long as service began before February 15, 2020
The SBA's original PPP Loan Forgiveness Application (Form 3508) will give you an idea of the information needed to apply for forgiveness. (Note: this will have to be updated to reflect legislative changes.)
You must begin preparing now for your loan forgiveness application and below is a general breakdown of how you can start this process. A successful forgiveness application is going to require good recordkeeping and bookkeeping in order to maximize the loan forgiveness amount. Keep track of all eligible expenses and their accompanying documentation for the forgiveness period. It is recommended that you consult with your tax advisor, legal counsel or bookkeeping service to assist you if necessary.
- Eligible expenses are only those incurred during your 24-week forgiveness period, which starts the date Old Point disbursed the funds of your loan OR the first day of your first pay period following your disbursement date. (Note: Your disbursement date may not necessarily be the date on which you signed the Promissory Note.)
- Consider your payroll schedule - You may want to adjust the timing of your payroll date to accommodate as many payroll cycles as possible.
- At least 75% of your PPP loan funds must be used for payroll costs.
- No more than 25% of your PPP funds can be used for non-payroll purposes.
- Payroll costs are capped at $100,000 on an annualized basis for each employee.
- Payments to independent contractors are not included in your payroll costs.
- Remember: The following payroll costs are not eligible for loan forgiveness, but you should be keeping track of these:
- Payments to an independent contractor
- Cash compensation in excess of $100,000
- The employer’s share of federal payroll taxes
- Qualified sick leave and qualified parental leave wages for which credit is allowed under Families First Coronavirus Response ACT (FFCRA)
Review your staffing requirements:
- To receive your highest loan forgiveness, you must maintain the number of employees on your payroll.
- If you are Self-Employed:
- 24-weeks of your 2019 net profit will be eligible for loan forgiveness.
- Mortgage interest, rent and/or utilities expenses must have been claimed or are entitled to be claimed as a deduction on your 2019 Form 1040 Schedule C to qualify for loan forgiveness.
Keep a thorough, running list of all documentation, which may include the following:
- Documents verifying your number of FTEs on payroll and their pay rates for the periods used to verify you’ve met the staffing and pay requirements:
- Payroll reports from your payroll provider
- Payroll tax filings (Form 941)
- Documents verifying any retirement and/or health insurance contributions
- Income, payroll and unemployment insurance filings from your State
- Documents verifying your eligible interest, rent, and/or utility payments including but not limited to:
- Canceled checks
- Payment receipt
- Account statements
PPP Loan Forgiveness FAQ:
We have set up an online forgiveness application process and will email you when it’s time to get started. All forgiveness applications to Old Point will need to be submitted via our online portal.
We continue monitoring legislative changes and updated guidance from the SBA and we’ll update or process with any applicable updates. We encourage you to review the SBA’s documentation requirements set forth in the applications available on the SBA’s and Treasury’s website. In addition, we encourage you to review all updated guidance related to other matters impacting the PPP, CARES Act and Flexibility Act on the SBA’s and Treasury’s website.
Here is when you can file for forgiveness:
- The end of your 24-week or 8-week (if available and elected) PPP Forgiveness Period (Covered Period), or December 31, 2020, whichever is earlier
- Before the end of your Covered Period if you’ve used all the loan proceeds for which you’ll be requesting forgiveness
- Or at any time prior to the maturity date of your PPP loan
Keep in mind that despite the repayment terms stated in your promissory note, you won’t have to start making payments on your loan until the SBA has made a final decision on your forgiveness application and sent that amount to Old Point, or, if you don’t apply for forgiveness, until 10 months after the last day of your Covered Period.
If your loan was made on or after June 5, 2020—no. Your Covered Period is 24 weeks.
If your loan was made prior to June 5, 2020—yes. You can choose either the 8-week or 24-week period when you apply for forgiveness.
Please plan accordingly with regard to all supporting documentation.
Yes. On June 16, 2020, the SBA released Form 3508EZ, simplifying the forgiveness application process for certain borrowers.
You can submit Form 3508EZ if you are:
(1) a self/employed individual/independent contractor/sole proprietor who had no employees at the time of your PPP loan application and didn’t include employee salaries in the computation of average monthly payroll; or
(2) you didn’t reduce annual salary or hourly wages by more than 25%during the Covered Period, compared to the period between January 1, 2020 and March 31, 2020, not including any employee who received more than $100,000 on an annualized basis during any pay period in 2019, and you did not reduce the number of employees or average paid hours of employees between January 1, 2020 and the end of the Covered Period; or
(3) you didn’t reduce annual salary or hourly wages by more than 25%during the Covered Period, compared to the period between January 1, 2020 and March 31, 2020, not including any employee who received more than $100,000 on an annualized basis during any pay period in 2019, and you were unable to operate during the Covered Period at the same level of business activity as before February 15, 2020, due to compliance with certain COVID-19 related measures related to social distancing, sanitation, or other worker or customer safety requirements.
Please keep in mind that while we will do our best to process all forgiveness applications in a timely manner, the SBA has established that the lender (Old Point) has 60 days from receipt of the completed application to review and provide an initial decision and then the SBA will have 90 days after that to review and accept the application and remit the appropriate forgiveness amount unless the SBA requires additional review of the loan.
No. Under the Flexibility Act, payments are deferred until the SBA has made a final decision on your forgiveness application and sent that amount to Old Point.
If you don’t apply for forgiveness within 10 months of the last day of the Covered Period, however, you will have to begin making payments of principal, interest, and fees. The terms of your promissory note will be updated to reflect the deferred payment terms under the Flexibility Act and Old Point will be providing further information on this process in the near future.
No. The Flexibility Act reduced the minimum payroll cost amount to 60% of the forgivable amount, meaning up to 40% of the forgiven amount can be non-payroll costs. Prior to the Flexibility Act, at least 75% of forgivable expenses were required to consist of payroll costs, meaning that no more than 25% of the forgiven amount could consist of eligible non-payroll costs such as certain payment for rent and utilities.
For additional information, please refer to the U.S. Department of the Treasury’s CARES Act Assistance for Small Businesses website or the SBA's dedicated PPP website.
Old Point is here to assist you should you have any other questions.
You can reach out directly to your Relationship Manager, contact our Customer Service Center at 757.728.1290 or email PPPapplicant@oldpoint.com.