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Frequently Asked Questions

Question:

Can a PPP loan be forgiven?

Answer:

Yes. PPP loans (the full principal amount and any accrued interest) may be forgiven, meaning they do not have to be repaid. Remember if you do not apply for forgiveness, you will have to repay the loan. You will do this directly with your lender and they are required to process your request within 60 days. 

It is understood that you will be eligible for full forgiveness if you follow a few guidelines:

  1. You use the loan for:
    1. Payroll – salary, wage, vacation, parental, medical, sick leave, health benefits.
    2. Mortgage interest – as long as the mortgage was signed before February 15, 2020.
    3. Rent – as long as the mortgage was signed before February 15, 2020.
    4. Utilities – as long as the mortgage was signed before February 15, 2020.
  2. You maintain your number of Full Time Equivalent (FTE) employees (or rehire them by June 30, 2020) .
  3. You use at least 60% of the loan on eligible payroll costs.
  4. No more than 40% of loan was used for non-payroll costs.

Question:

What changes did the PPP Flexibility Act make?

Answer:

The PPP Flexibility Act amends several provision of the Paycheck Protection Program:

  • Borrowers now have 24 weeks to spend PPP loan proceeds, up from 8 weeks.
  • Reduces mandatory payroll spending from 75% to 60%.
  • Time to pay off the loan has been extended to five years instead of 2.
  • Extending the time a borrower can qualify for the FTE and Salary Wage reduction safe harbors.

Question:

What if I can't use 60% of the PPP loan on payroll costs?

Answer:

You can still qualify for partial loan forgiveness if less than 60% of your PPP loan is used for payroll.

Question:

Where can I get the PPP forgiveness application form?

Answer:

You can get the form here.

 

You will also need to provide documentation for your payroll and non-payroll costs and FTE employee counts.

Question:

When do I need to apply for PPP loan forgiveness?

Answer:

You are not required to apply immediately after your covered period end. Payments on the principle of the loan amount are deferred for 6 months, which includes the covered period.

 

To avoid payments on the principle of the loan amount, you should apply for loan forgiveness within 6 months.

Question:

How long will it take to know if the loan is forgiven?

Answer:

Lender must make decision on forgiveness within 60 days.

Question:

When do you start to apply the 24 week period (covered period) for using your loan?

Answer:

Note: The Paycheck Protection Program Flexibility Act of 2020 changed the covered period from 8 weeks to 24 weeks. 

If you loan was disbursed before June 5, 2020 you can choose to use the 8 week covered period when you received the loan or the extended period of 24 weeks.

The actual 24 week period can start on one of two dates:

  1. The day your lender sends your first PPP loan disbursement.
  2. The first day of the first pay period after you get the loan. (Only borrowers with a bi-weekly or more frequent payroll frequency can use this method)

The PPP loan disbursement dates will vary based on when it is approved and acted upon so the period is different for each borrower. 

 

Question:

How do I get my total payroll costs for the covered period?

Answer:

This is the total payroll you will incur during the 24 weeks after you receive your PPP loan, which may include wages, salary, cash tips, commissions, retirement benefits, health insurance and/or sick pay, PTO, employer assessed State and local taxes.

 

Compensation earnings are capped at $100,000 yearly per employee.

Question:

How do I get the number for rent, utilities, and mortgage interest for the covered period?

Answer:

Rent, utilities, and mortgage interest are non-payroll costs that are eligible expenses for loan forgiveness if the agreements existed before 2/15/2020.

 

You can use up to 40% of the PPP loan to pay these costs during the covered period.

 

Note: The Paycheck Protection Program Flexibility Act of 2020 changed the amount you can use on non-payroll costs from 25% to 40%.

Question:

How do I determine if there's a decrease in wages greater than 25%?

Answer:

Loan forgiveness may be reduced if the average wages for employees during the covered period decreases by more than 25% compared to the 1st quarter of 2020.

To determine if wages has decreased by more than 25%:

  1. Calculate the average salary for salaried employees or average hourly wage for hourly employees during the covered period. (Covered Period)
  2. Do the same calculation for January 1 through March 31, 2020. (Lookback Period)
  3. Divide the covered period by the lookback period.
  4. If the result is 0.75 or greater, then the employee will not affect your forgiveness amount.
  5. If the result is less than 0.75, multiply the lookback period value by 0.75 and subtract the covered period value.
  6. Total results for all employees that have salary or hourly wages decreased by greater than 25%

Enter zero if there were no reductions in excess of 25%.

 

Question:

How do I get the number for average FTEs during the covered period?

Answer:

For each employee during the covered period, calculate the average number of hours paid per week, divide by 40, and round to the nearest tenth. The maximum for each employee is 1.0.

 

You can also choose to count 1.0 for employees working 40 or more hours per week and 0.5 for those working less than 40 hours per week.

 

Add up all the numbers for all your employees and this will get you the average FTEs during the covered period.

Question:

How do I get the number for average FTEs during the comparison period?

Answer:

You can choose between two periods for the comparison period:

  1. February 15, 2019 to June 30,2019
  2. January 1, 2020 to February 29, 2020

We suggest to calculate for both periods and see which period has the lower FTE value. The lower FTE value will help you maximize your forgiveness amount.

 

For each employee during the covered period, calculate the average number of hours paid per week, divide by 40, and round to the nearest tenth. The maximum for each employee is 1.0.

 

You can also choose to count 1.0 for employees working 40 or more hours per week and 0.5 for those working less than 40 hours per week.

 

Add up all the numbers for all your employees and this will get you the average FTEs during the comparison period.

Question:

What is Total Loan Amount Forgiven?

Answer:

This is the total amount of your PPP loan that will be forgiven.

This is the lowest value from these 3 calculations:

  1. [(Payroll + Non-payroll Costs) – Wage Reduction Amounts] X FTE Reduction Quotient
  2. PPP Loan Amount
  3. Payroll Cost 75% Requirement

Question:

What is Total Amount Not Forgiven?

Answer:

This is the total amount of money that will be not be forgiven based on how you have allocated the money. As a reminder, if you do not use the whole loan, whatever is not used will also be included as money that will need to be repaid.

Question:

What if I can't maintain the number of Full-Time Equivalent (FTE) employees?

Answer:

If you can’t maintain the number of Full Time Equivalents (FTE) employees, then you’ll see a decrease in the amount of loan forgiveness you will be eligible for. For example, a 20% drop in FTEs results in a 20% decrease in the amount of the loan forgiveness.

However, there is an exception for rehires. Reductions in employment or salary that occur between Feb 15, 2020 and April 26,2020 will not reduce the amount of loan forgiveness if you eliminate the reduction in employees or the reduction in wages by June 30, 2020.

Question:

Do I need to rehire the same employees?

Answer:

There is no requirement for an employer to rehire the same employees. However, you do need to restore the average number of full-time equivalent employees as before.

Question:

What if an employee refuses to come back to work?

Answer:

If an employee declines your offer, you will be eligible for an FTE Reduction Exception and your forgiveness amount will not be reduced.

Make sure:

  1. You made a written offer to rehire such employee during the covered period
  2. The offer was for the same salary or wages and same number of hours earned by employee in the last pay period
  3. The offer was rejected by employee
  4. You maintain records documenting offer and rejection
  5. Inform the state unemployment insurance office of employee’s rejected offer

 

 

Question:

Can I pay my employee's in advance for payroll?

Answer:

No, payroll costs must be paid during the covered period.

Question:

How do employees that make over $100,000 annually affect my loan forgiveness?

Answer:

Employees that makes an annual salary of over $100,000 in 2019 are removed from the loan forgiveness calculation.

Question:

If my total loan amount cannot be forgiven, what should I do?

Answer:

There are many stipulations to ensure that the PPP loan that you are being given by the SBA will be forgiven. These stipulations were created to incentivize people that receive the loan to retain employees and their wages. But, while forgiveness is an important aspect to the loan, as a reminder, the loan is a 1% loan with a 2 year payback period. So, please consult with the legal and financial professionals that you work with to understand how this may be beneficial for your business. 

Question:

Who are we?

Answer:

We are financial professionals, small business consultants, business owners, and technologists from Coast who have applied for these loans either for ourselves, or on behalf of clients, friends, and family. We want to share what we have learned to help you understand what funds may be available for you, how to apply for those funds, what documents you will need, and hopefully help you avoid pitfalls along the way. We are not being compensated in any way for this, we are simply providing information as an act of support for all of the small business owners out there.

 

We will do our very best to keep the information up to date but please remember that instructions are being clarified and refined on a daily basis. The top of the page will show when the page was last updated.

This Paycheck Protection Program Calculator is a public service tool created by Dogpatch Financial, Combs Business Consulting, and the technology team at Coast to help small businesses navigate new challenges during this time.