Paycheck Protection Program Forgiveness Resource Center

Updates, Video Training and Frequently Asked Questions on the PPP Loan Forgiveness Process

The Paycheck Protection Program (PPP) is part of the Coronavirus Aid, Relief and Economic Security Act or CARES Act, which provides $2 trillion of aid and stimulus for both individuals and businesses. The PPP authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis.

On April 24, 2020, an additional package of $310 billion in funding was authorized for the Small Business Administration (SBA) PPP. This package aims to replenish the available funds to get PPP Loans to our nation’s small businesses.

On June 5, 2020, the PPP Flex Act was signed into law. This law provided additional flexibility to applicants and institutions. The changes include an extension of the applicable coverage period for expenses from eight weeks to 24 weeks (or December 31, 2020, whichever is sooner) after the application is approved. The term of any loan approved after June 5th has also been extended to a minimum maturity of five years.

Click for Our PPP Forgiveness Webinar Presentation Deck

Click for Our PPP Loan Forgiveness Portal User Guide

 


Latest Updates on the Paycheck Protection Program

SBA Guidance on PPP Loan Forgiveness - August 5, 2020

On August 4, the Small Business Administration (SBA), in consultation with the Department of the Treasury, provided guidance to address borrower and lender questions concerning forgiveness of Paycheck Protection Program (PPP) loans. The complete SBA FAQ document can be found here.


IMPORTANT NOTICE: The following FAQs are based on the provisions of the CARES Act as implemented and interpreted by the U.S. Small Business Administration (“SBA”) and the U.S. Treasury Department (“U.S. Treasury”) through interim and final regulations, FAQs, and regulatory guidance and interpretations. The SBA and U.S. Treasury continue to issue new regulations, FAQs and guidance that in some cases changes or conflicts with prior guidance. The eligibility of a PPP loan for forgiveness and the amount and timing of any forgiveness will be subject to and dependent on approval pursuant to the regulations, FAQs and guidance in effect at the time a request for forgiveness is processed and as a result, we cannot provide you any assurances regarding forgiveness of your loan until such approval is received and any review or audit by the SBA completed. The information provided herein is not intended to constitute legal advice. 

Frequently Asked Questions on PPP Loan Forgiveness

  • Q: When can customers apply for forgiveness of their PPP Loan?

    A: Arizona Bank & Trust's Forgiveness Application Portal will be available soon.

  • Q: WHERE CAN OUR CUSTOMERS APPLY FOR FORGIVENESS?

    A: Arizona Bank & Trust customers can register and apply here.

  • Q: Who can apply for PPP Loan Forgiveness?

    A: Everyone who received a PPP Loan can apply for Forgiveness. Depending on how the funds were used, customers are eligible to receive full or partial forgiveness.

  • Q: WHAT DO CUSTOMERS NEED TO DO TO APPLY FOR FORGIVENESS?

    A: Customers will need to complete the PPP Forgiveness application here and submit the application with the required documentation by December 31, 2020 (or 24 weeks after the PPP loan was approved, whichever is earlier).

     

    The SBA has also provided a shortened application (3508EZ) for applicants who meet certain criteria. This application will be available through the bank’s PPP Forgiveness online application. Customers must answer and certify several criteria to be eligible for the shortened application. The shortened application does not result in a different forgiveness amount than the normal application process. As customers go through the steps in the forgiveness portal, it will automatically select the appropriate application relevant to a customer’s situation (and their certifications). Customers do not need to reach out to the bank for the shortened application form.

  • Q: How does a customer calculate their average monthly Payroll Costs?

    A: Sum of Included payroll cost – sum of Excluded payroll costs = Payroll Costs

    Included Payroll Cost:

    1. For Employers: The sum of payments of any compensation with respect to employees that is a: 
      • salary, wage, commission, or similar compensation;
      • payment of cash tip or equivalent;
      • payment for vacation, parental, family, medical, or sick leave
      • allowance for dismissal or separation
      • payment for group health care and retirement benefits
      • payment of state or local tax assessed on the compensation of the employee
    2. For Sole Proprietors, Independent Contractors, and Self-Employed Individuals: The net income not more than $100,000 in one year

    Excluded Payroll Cost: 

    1. Compensation of an individual employee in excess of an annual salary of $100,000 (note: employer contributions to healthcare and retirement benefits are not part of the amount deemed in excess of $100,000 annual salary)
    2. The employer portion of payroll taxes
    3. Any compensation of an employee whose principal place of residence is outside of the United States
    4. Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116–  5 127); or qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act
  • Q: How could the forgiveness be reduced?

    A: The amount of loan forgiveness calculated above is reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees.
    The forgiveness amount will also be reduced if a customer spent greater than 40% on non-payroll costs.

    For employees who earned $100,000 or less in 2019 (or were not employed by the borrower in 2019), the borrower’s loan forgiveness will be reduced for each employee whose average pay (salary or hourly wage) during the 24-week period is less than 75% of their average pay from the full quarter prior to the 24-week period (for most borrowers: January 1 to March 31, 2020). The amount of the reduction in loan forgiveness is based on the amount of the reduction in pay.

    Borrowers can avoid having their loan forgiveness amount reduced if they restore an employee’s pay. Specifically, if by no later than December 31, 2020, the employee’s annual salary or hourly wage is equal to or greater than their annual salary or hourly wage on February 15, 2020, the borrower’s loan forgiveness is not reduced.

  • Q: What if customers bring back employees or restore wages?

    A: Reductions in employment or wages that occur between February 15, 2020, and December 31, 2020, shall not reduce the amount of loan forgiveness IF by or on December 31, 2020, the borrower eliminates the reduction in employees or reduction in wages.

  • Q: What if customers are unable to rehire or replace employees?

    A: The Flex Act gives leniency to businesses that make reasonable efforts to replace or rehire staff but are unable to do so. The employer must demonstrate a “good faith” written offer to rehire at the same salary/wage, with a written denial of the offer from the employee.

  • Q: What other documents will customers need to include in their Forgiveness application?

    A: Customers will need to provide their lender with:

    • 3508 or 3508EZ
    • Payroll Costs Support
    • Mortgage Interest Support
    • Lease/Rent Support
    • Utilities Support
    • Other Support
    • Number of FTE’s Support
    • Forgiveness Calculation
  • Q: How much of the PPP loan will be forgiven?

    A: Customers will owe money when the PPP loan is due if they use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 24 weeks after getting the loan. Not more than 40% of the forgiven amount may be for non-payroll costs.

    They will also owe money if they do not maintain their staff and payroll.

    • Number of Staff: A customer’s  loan forgiveness will be reduced if they decrease their full-time employee headcount.
    • Level of Payroll: Their loan forgiveness will also be reduced if they decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.

    The U.S. Chamber of Commerce provides a very good breakdown of the factors which go into the forgiveness amount. Click Here to see this breakdown.

  • Q: How can customers request loan forgiveness?

    A: Customers can submit a request to the bank that originated the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. Customers must certify that the documents are true and that they used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must decide on the forgiveness within 60 days.

  • Q: What is the maturity date of a PPP loan?

    A: If the loan was funded prior to June 5, 2020, there is a minimum maturity period of two years. Any loans funded after June 5, 2020, have a minimum maturity of five years.

Frequently Asked Questions on the Paycheck Protection Program

  • Q: Who could apply for a PPP Loan?

    A: All businesses – including nonprofits, veteran’s organizations, tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – with 500 or fewer employees can apply. Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries. Click here for additional details.

  • Q: How long will this program last?

    A: Although the program is (as of June 5th) open until December 31, 2020, we encourage our customers to apply as quickly as possible because there is currently a funding cap and lenders need time to process the loans.

  • Q: How many loans can customers take out under this program?

    A: Only one per business that they own and operate.

  • Q: Do customers need to personally guarantee this loan?

    A: No. There is no personal guarantee requirement. ***However, if the proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against the borrower.***

  • Q: For what can customers use these loans?

    • Payroll costs, including benefits
    • Interest on mortgage obligations in force before February 15, 2020
    • Rent, under lease agreements in force before February 15, 2020; and
    • Utilities, for which service began before February 15, 2020
  • Q: What counts as payroll costs?

    • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
    • Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
    • State and local taxes assessed on compensation; and
    • For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.
       
  • Q: What time period should borrowers use to determine their number of employees and payroll costs to calculate their maximum loan amounts?

    A: In general, borrowers can calculate their aggregate payroll costs using data either from the previous 12 months or from calendar year 2019.

    For seasonal businesses, the applicant may use average monthly payroll for the period between February 15, 2019, or March 1, 2019, and June 30, 2019. An applicant that was not in business from February 15, 2019, to June 30, 2019, may use the average monthly payroll costs for the period January 1, 2020, through February 29, 2020.

  • Q: The CARES Act excludes from the definition of payroll costs any employee compensation in excess of an annual salary of $100,000. Does that exclusion apply to all employee benefits of monetary value?

    A: No. The exclusion of compensation in excess of $100,000 annually applies only to cash compensation, not to non-cash benefits.

  • Q: Do PPP loans cover paid sick leave?

    A: Yes. PPP loans covers payroll costs, including costs for employee vacation, parental, family, medical, and sick leave. However, the CARES Act excludes qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116–127). Learn more about the Paid Sick Leave Refundable Credit here.

  • Q: Should payments that an eligible borrower made to an independent contractor or sole proprietor be included in calculations of payroll costs?

    A: No. Any amounts that an eligible borrower has paid to an independent contractor or sole proprietor should be excluded from the eligible business’s payroll costs. However, an independent contractor or sole proprietor will itself be eligible for a loan under the PPP, if it satisfies the applicable requirements.

  • Q: How large can the loan be?

    A: Loans can be for up to 2.5x the applicant’s average monthly payroll costs from the last year. That amount is subject to a $10 million cap.

  • Q: What is the interest rate?

    A: 1.00% fixed rate.

  • Q: When do customers need to start paying interest on their loan?

    A: All payments are deferred for 10 months from the point at which the forgiven amount is determined; however, interest will continue to accrue over this period.

  • Q: Can customers pay their loan earlier than the two- to five-year maturity date?

    A: Yes. There are no prepayment penalties or fees.

  • Q: Do customers need to pledge any collateral for these loans?

    A: No. No collateral is required.

  • Q: What additional criteria does the customer’s loan need to meet?

    A: As part of the application, borrowers need to certify in good faith that: 

    • Current economic uncertainty makes the loan necessary to support the ongoing operations of the Applicant
    • The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments. Applicant understands that if the funds are used for unauthorized purposes, the federal government may pursue criminal fraud charges.
    • Documentation verifying the number of full-time equivalent employees on payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight-week period following this loan will be provided to the lender.
    • Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Due to likely high subscription, it is anticipated that not more than 40% of the forgiven amount may be for non-payroll costs.
    • During the period beginning on February 15, 2020, and ending on December 31, 2020, the Applicant has not and will not receive another loan under this program.
    • Applicant further certifies that the information provided in this application and in all supporting documents and forms is true and accurate. Applicant realizes that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable by law.
    • Applicant acknowledges that the lender will calculate the eligible loan amount using the tax documents that the Applicant has submitted. Applicant affirms that these tax documents are identical to those submitted to the IRS. Applicant also understands, acknowledges, and agrees that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for compliance with SBA Loan Program Requirements and all SBA reviews.
    • Applicant acknowledges that the bank provided the forms and necessary information to complete the Paycheck Protection Program Application. By filing an application with the bank, the applicant further certifies that no agent (attorney, accountant, consultant, etc.) was utilized in the completion of the application. Applicant further acknowledges and agrees that the bank will not process any application or close any loans if an agent seeking payment for services has been utilized and that applicant will inform any persons consulted with regarding the application of this requirement.
  • Q: What do borrowers need to certify?

    A: As part of the application, borrowers need to certify in good faith that: Current economic uncertainty makes the loan necessary to support your ongoing operations. The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments. Borrowers have not and will not receive another loan under this program. Borrowers will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight to 24 weeks after getting this loan. Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities.

    Due to likely high subscription, it is anticipated that not more than 40% of the forgiven amount may be for non-payroll costs. All the information that the borrower provided in the application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law. Borrowers acknowledge that the lender will calculate the eligible loan amount using the tax documents they submitted. Borrowers affirm that the tax documents are identical to those they submitted to the IRS. And borrowers also understand, acknowledge, and agree that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for compliance with SBA Loan Program Requirements and all SBA reviews.

  • Q: Where can customers find more information?

    A: Customers can find the official SBA “PPP Frequently Asked Questions” here. The SBA makes regular updates to their guidance and the referenced FAQ. This lending institution is providing a basic version of the FAQ for ease of use on behalf of the borrower. If there is any discrepancy between the information found on this lending institution’s FAQ and the SBA FAQ, the SBA document should be taken as the source of truth.

To view the full FAQ sheet provided by the SBA, in consultation with the Department of the Treasury, click here.


More information can be found on the U.S. Chamber of Commerce Coronavirus Resources site with a Small Business Guide and Checklist.

 


IMPORTANT NOTE WHEN CLICKING THROUGH TO EXTERNAL WEBSITES: When clicking on links within the video, you will be linking to another website not owned or operated by Arizona Bank & Trust. Arizona Bank & Trust is not responsible for the availability or content of this website and does not represent either the linked website or you, should you enter into a transaction. We encourage you to review their privacy and security policies which may differ from Arizona Bank & Trust. Click to go back to video.