• PPP Forgiveness – Ready, Set, Document.


    With PPP applications in and, hopefully, funds in the bank, Insider wanted to start turning to the subject of steps to take to maximize your businesses potential for debt forgiveness.   We saw the following information from a community bank and wanted to pass along.

    Congratulations again on being approved for the Paycheck Protection Program (PPP) loan.

    The most important thing you can do now is spend and document these funds correctly. We want to make sure they are forgiven so you don’t have to pay back a single cent.


    • Eight weeks to spend; day one starts the day funds are disbursed and must be spent within the next eight weeks
    • The seventh week is the earliest you can apply for forgiveness.

    How to spend.

    In order for your loan to be forgiven, funds must be used towards permissible and forgivable expenses. If members unintentionally use funds for unapproved expenses, SBA may deem those funds unforgivable. If members knowingly use funds for unauthorized purposes that could be considered fraudulent, the member could be subject to fines and other penalties.

    Forgivable uses.

    Payroll costs (at least 75%).

    • Salaries up to $100k, commissions, tips, group health, paid sick leave, paid family and medical leave, and insurance premiums.
    • Employee Retention – based on FTE numbers from either 2/15/19 to 6/30/19 or 1/1/20 to 2/29/20
    • Paying same wage – if wages were cut, member can restore wages by 6/30/20 and forgiveness amount will not be reduced

    Other Costs (up to 25%).

    • Mortgage interest, rent payments, and utilities (electricity, gas, water, transportation, phone, internet, but not entertainment). All these must be in place prior to 2/15/20.

    Excluded items.

    • Compensation of an employee in excess of $100,000.
    • Employer’s share of federal payroll taxes (i.e. SSI and Medicare).
    • Compensation of employees who reside outside of US.
    • Qualified sick and family leave under the Families First Coronavirus Response Act.

    How to document.

    We suggest you open a separate account to track how you spend loan proceeds.

    • You will need documentation for:
      • The number of full-time employees on payroll.
      • Pay rates for the referenced periods including payroll tax filings to the IRS, state income, payroll and unemployment insurance filings and payroll registers.
      • Other covered expenses (mortgage interest, rent, utilities) including canceled checks, payment receipts, account statements, invoices, etc.

    How to apply.

    • Most community banks or credit unions will use the same web-based program for SBA PPP Loan Forgiveness that it has used for the SBA PPP Loan Submission.
    • The banks will submit Forgiveness Applications with required documentation through the portal.
    • Data will be captured by the program and a forgiveness percentage calculated.
    • Forgiveness calculation worksheets will be available and transparent.
    • Discuss tax implications with your CPA or a tax professional.

    • You must apply for forgiveness, as forgiveness is not automatically granted.
    • Any breach, default, or misrepresentation during the application process will put forgiveness at risk.
      • i.e. if someone waits until the loan gets termed out and then misses a payment before applying for forgiveness, forgiveness is at risk.
    • Improper use of PPP funds can lead to – no debt forgiveness, potential fines, criminal penalties, and civil penalties.


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