The Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act), which was signed into law on June 5, makes certain material changes to the Small Business Administration (SBA) Paycheck Protection Program (PPP), including to the terms of forgiveness. We are continuing to update our online PPP loan forgiveness application portal as we await new guidance from the SBA as a result of the recent changes. We encourage you to monitor information from the SBA, and what it might mean for your business, as this program continues to evolve.
While First Tech is here to help, as the borrower, you’re responsible for understanding the program rules and if your loan qualifies for forgiveness. Loan forgiveness is not automatic. If you plan to seek forgiveness, for your convenience we request that you submit an online application through First Tech's online portal. The portal will be available on this webpage starting September 1st.
How to apply for PPP loan forgiveness
- We strongly encourage you to keep detailed records of how your business is using PPP funds. Clear documentation will help you through the loan forgiveness process.
- If you applied for a PPP loan and received funding through First Tech, we'll provide the next steps for you soon on how to prepare the forgiveness application and provide supporting documentation.
- First Tech is preparing an online loan forgiveness application. This process will be similar to the application for the PPP loan so you will need to have all of your information/documentation handy to complete it. Your SBA Loan Number and TIN/EIN will be required to start the application for forgiveness.
Preparing for loan forgiveness
Familiarize yourself with the SBA Paycheck Protection Program Loan Forgiveness Application Instructions, SBA Form 3508 and SBA Form 3508EZ on the SBA.gov and Treasury.gov websites. SBA Form 3508EZ provides a checklist to help you determine which loan forgiveness application to use. It provides the definition of "Covered Period" and "Alternative Payroll Covered Period," the types of costs that are eligible for forgiveness, and what documentation you will need to submit with your application. The links provided to the SBA forms are provided as a template for your understanding.
When can I apply for PPP loan forgiveness?
New federal legislation, Flexibility Act, signed into law on June 5, 2020, contains several important modifications to the PPP loan forgiveness process. We've received additional guidance from the U.S. Department of the Treasury (Treasury) and SBA. The SBA has recently changed the release date for forgiveness applications so First Tech will start to accept online applications for forgiveness on September 1st.
Who determines the amount of loan forgiveness?
The SBA is responsible for determining the amount of loan forgiveness. The amount forgiven may include full, partial, or no forgiveness. The SBA’s rules concerning forgiveness may change over time. The latest information is available on the Treasury and SBA websites.
How does the forgiveness work?
Up to 100% of the principal amount and any accrued interest of the loan may be forgiven if you use the proceeds on qualifying expenses during the Covered Period*. At least 60% of the PPP loan proceeds must be used for payroll costs. Up to 40% of the loan proceeds can be for eligible non-payroll costs. However, there are certain actions that may reduce the amount of forgiveness, such as reducing the number of employees or reducing employee salaries or wages.
*Refer to the Loan Forgiveness Application Instructions for Borrowers definitions of Covered Period and Alternative Payroll Covered Period.
What expenses are eligible for loan forgiveness?Eligible payroll costs include:
- Payroll costs including salary, wages, and tips up to $100,000 annualized pay per employee;
- Employee benefits including health care expenses, retirement contributions and state taxes imposed on employee payroll paid by the employer (such as unemployment insurance premiums); and
- Self-Employed Individuals with income from Schedule C
- If you have employees: Payroll costs including salary, wages, and tips up to $100,000 annualized pay per employee, as well as covered benefits for employees (not owners), including health care expenses, retirement contributions, unemployment insurance premiums and state taxes on employee payroll.
- Owner compensation replacement, calculated based on 2019 net profit with forgiveness of such amounts limited to eight weeks' worth (8/52) of 2019 net profit (up to $15,385) for an eight-week covered period or 2.5 months' worth (2.5/12) of 2019 net profit (up to $20,833) for a 24-week covered period, but excluding any qualified sick leave amount for which a credit is claimed under section 7002 of the Families First Coronavirus Response Act (FFCRA) (Public Law 116-127) or qualified family leave equivalent amount of which a credit is claimed under section 7004 of FFCRA.
- No additional forgiveness for retirement or health insurance contributions for self-employed or Schedule C filers.
- Interest on business mortgage obligations (not including the pre-payment of interest or any payment of principal) entered into before February 15, 2020;
- Business rent/lease payments (on real or personal property) if the lease was entered into before February 15, 2020;
- Business utility payments (e.g. electricity, gas, water, transportation, telephone, internet access) if the service began before February 15, 2020; and
- Self-Employed Individuals with income from Schedule C must have claimed a deduction for business mortgage payment, business rent payments and/or business utility payments on 2019 Form 1040 Schedule C for these to be a permissible use during the "covered period".
Is it possible to have some of my loan forgiven, but not all?
Yes. You will owe money when your loan is due if you use the loan proceeds/amount for anything other than payroll costs, mortgage interest, rent, and utilities over the Covered Period. Payroll costs must represent at least 60% of the forgiveness amount. If you received an SBA Economic Injury Disaster Loan (EIDL) emergency loan/grant from the SBA, the SBA will deduct EIDL Advance Amounts from the forgiveness amount remitted to the Lender as required by section 1110(e)(6) of the CARES Act.
What happens if some or all of my loan amount is not forgiven?
Use of PPP loan proceeds for unauthorized purposes will not be forgiven. Borrowers are responsible for repaying any amount not forgiven by the SBA, regardless of reason.
Can the loan forgiveness amount be reduced if you do not maintain your staff and payroll?
Yes. If you decrease your full-time employee headcount or if salaries and wages are decreased compared to an earlier specified period by more than 25% for any employee that made less than $100,000 annualized in 2019. Refer page 8 of SBA Form 3508 for FTE Reduction Exceptions
How can I avoid a reduction in forgiveness amount?
Borrowers have until December 31, 2020 to restore full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020. Additionally, you may be able to avoid a reduction in forgiveness if you are, in good faith, (a) able to document that you were unable to (i) rehire individuals who were its employees on February 15, 2020, or (ii) hire similarly qualified employees for unfilled positions on or before December 31, 2020; or (b) able to document an inability to return to the same level of business activity existing prior to February 15, 2020, due to compliance with COVID-19 related social distancing guidance from federal agencies.
Some of my employees voluntarily resigned, requested a reduction of hours, or were fired for cause. Do these situations still count as an FTE reduction?
No. You do not need to include employees who voluntarily resigned, requested reduced hours, or were fired for cause in your wage reduction calculation; provided you retain supporting documentation. You can also exclude employees who were fired or furloughed where you made a good-faith written offer to rehire that was rejected by the employee. Refer page 8 of SBA Form 3508 instructions for FTE Reduction Safe Harbors
If my loan is not forgiven, how much is my monthly payment?
Please refer to your First Tech/SBA PPP Note for your monthly loan payment and first due date.
Can I start making PPP loan payments early?
Yes, you can begin making payments early. Payment may be made using First Tech's online banking, by visiting a branch, or calling the contact center.
How will I apply for loan forgiveness?
First Tech will alert borrowers with an email notification providing instructions on how to login and initiate the loan forgiveness application. You will need your SBA Loan Number and TIN/EIN.
Can I submit the SBA PPP Loan forgiveness application in paper form?
Yes. However, our preference, for your convenience and ours, is that you take advantage of the First Tech online application portal. If you cannot get access to the online portal, please contact us at 503.469.7707 or email us at SBAPPPInquiries@firsttechfed.com to arrange a paper submission.
Where can I go with questions on how to complete the required forgiveness calculation form?
You can reference the PPP Loan Forgiveness Applications as well as current applicable SBA regulations and guidance from the SBA website or consult with your own advisors (accountants or attorneys) with questions. You may contact First Tech’s PPP Inquiry phone line at 503.469.7707 or email us at SBAPPPInquiries@firsttechfed.com.
What can I expect after I have submitted my loan forgiveness application?
Once you have submitted your loan forgiveness application through First Tech’s online portal, First Tech has 60 days to review your application and supporting documents. The accuracy and completeness of the application and information provided will be key to processing your application as quickly as possible. If we have questions about how you calculated your loan forgiveness we will contact your directly. Once First Tech has completed the review, we will send your application to the SBA. The SBA will have 90 days to review and approve your application and will respond to First Tech. You will be notified as soon as we hear from the SBA on your loan forgiveness decision.