Paycheck Protection Program Loan Forgiveness
We know that many of our customers have questions and are eager to get started with the forgiveness process. The below are three important updates:
- The Paycheck Protection Program Flexibility Act clarified some of the forgiveness guidelines and is addressed in this Interim Final Rule.
- Treasury Secretary Mnuchin gave his support for a simplified PPP Loan Forgiveness process for loans less than $150,000. In an effort to provide financial and administrative relief to smaller businesses, the Small Business Administration (SBA) issued a new form, 3508S, which was addressed in this Interim Final Rule.
- On January 19, 2021, the Small Business Administration (SBA) published revised forgiveness applications, instructions and guidance outlined in the Interim Final Rule.
- On December 27, 2020, President Trump signed a $900 billion bipartisan coronavirus relief package, including a simplified PPP Forgiveness process, allowing PPP loans of $150,000 or less to be forgiven after the borrower completes a one-page certification. This provision applies to existing PPP loans for which forgiveness has not yet been applied. As there are recordkeeping requirements, and the SBA reserves the right to audit the certification, PPP borrowers should continue to maintain supporting documentation.
- U.S. Small Business Administration: https://www.sba.gov/
- U.S. Department of Treasury: https://home.treasury.gov/
- Loan Forgiveness Process: https://home.treasury.gov/system/files/136/PPP-IFR-Loan-Forgiveness.pdf
- Borrower and Lender Responsibilities: https://home.treasury.gov/system/files/136/PPP-IFR-SBA-Loan-Review-Procedures-and-Related-Borrower-and-Lender-Responsibilities.pdf
Great Western Bank Application Process
Access the PPP Customer Portal here.
We have a PPP Customer Portal User Guide to help our customers navigate our portal and the application process, which can be found here
PPP Loan Forgiveness Applications
- A borrower may use this form only if the borrower received a PPP loan of $150,000 or less.
- Borrowers that meet ONE of the following criteria should use the EZ Application:
- Are self-employed and have no employees; OR
- Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
- Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.
- Borrowers required to use this form may wish to complete the tables found in the worksheet section on page 4, as the 'Box' totals will be needed for portal entries.
Loan Necessity Questionnaire for Loans Greater than $2M
The SBA recently proposed that PPP loans greater than $2M or related entities with combined loan amounts $2M or greater will be required to complete a Loan Necessity Questionnaire. Form 3509 for for-profit businesses and Form 3510 for not-for-profits can be found online and will be administered by the SBA once formally approved. Please check back for more details.
PPP Loan Forgiveness Details
The following are the permitted expenses in order for the loan to qualify for forgiveness:
- Payroll costs
- Employee compensation (wages, salaries, commissions or similar compensation) that does not exceed $100,000 on an annualized basis.
- Cash, tips or the equivalent.
- Vacation, parental, medical, sick or family leave (but not FFCRA compensation).
- Severance pay.
- Group healthcare benefits including premiums for employees, less amounts withheld from their paychecks. (Healthcare costs for self-employed individuals including sole proprietors and partners are not included.)
- Retirement benefits for employees paid by the employer. This does not include the pretax 401K contributions of the employee. Retirement benefits for self-employed individuals are not included.
- Employer share of state and local payroll tax costs like unemployment and disability insurance payments.
- Self-employment income (schedule C for a sole proprietor or K-1 self-employment income of a partner) up to $100,000 based on 2019 net earnings.
- Rent payments for leases dated before 2/15/2020.
- Utility payments under service agreements dated before 2/15/2020.
- Mortgage interest on business owned property, on loans originated before 2/15/2020.
- Payroll: verification of eligible cash compensation and non-cash benefit payments paid during the applicable period of time.
- FTE: showing average full-time equivalent (FTE) employees during the applicable period of time.
- Non-payroll: verification that the obligations or services existed before February 15, 2020 and eligible payments during the applicable period of time.
FTE Reduction Exceptions
- Employees who declined to return to work after receiving a written offer of rehire.
- Employees who were terminated for cause.
- Employees who voluntarily resigned.
- Employees who voluntarily requested (and received) a reduction in their hours.
Frequently Asked Questions
On August 4, 2020 the SBA released this FAQ document on PPP Loan Forgiveness, which divides the questions by topic: General Loan Forgiveness, Loan Forgiveness Payroll Costs, Loan Forgiveness Nonpayroll Costs, and Loan Forgiveness Reductions.
he SBA recently proposed that PPP loans greater than $2M or related entities with combined loan amounts $2M or greater will be required to complete a Loan Necessity Questionnaire. Upon the submission of a Forgiveness application for respective customers, we understand the SBA may notify us (Great Western Bank) of the request and we would in turn contact you with instructions and a list of necessary documentation. It is expected that you will have 10 days to complete the questionnaire and return to us. Form 3509 for for-profit businesses and Form 3510 for not-for-profits can be found online and administered by the SBA once formally approved.
The extension of the deferral period under the Flexibility Act automatically applies to all PPP loans. Lenders are required to give immediate effect to the statutory extension and should notify borrowers of the change to the deferral period. SBA does not require a formal modification to the promissory note. A modification of a promissory note to reflect the required statutory deferral period under the Flexibility Act will have no effect on the SBA’s guarantee of a PPP loan.
If the borrower does not apply for loan forgiveness within 10 months after the last day of the covered period, or if SBA determines that the loan is not eligible for forgiveness (in whole or in part), the PPP loan is no longer deferred and the borrower must begin paying principal and interest. If this occurs, we will notify the borrower of the date the first payment is due.
You will be notified via email what the proposed forgiveness amount is after Great Western Bank reviews your application, and you will be notified again via email once the SBA has reviewed and approved/declined your forgiveness application. Keep in mind that Great Western Bank has 60 days to review your forgiveness application, and the SBA then has an additional 90 days to also make a decision.
The Covered Period is either (1) the 24-week (168-day) period beginning on the PPP Loan Disbursement Date, or (2) if the Borrower received its PPP loan before June 5, 2020, the Borrower may elect to use an eight-week (56-day) Covered Period. For example, if the Borrower is using a 24-week Covered Period and received its PPP loan proceeds on Monday, April 20, the first day of the Covered Period is April 20 and the last day of the Covered Period is Sunday, October 4. In no event may the Covered Period extend beyond December 31, 2020.
The Flexibility Act amended the requirements to reduce the amount of PPP loan proceeds that must be used for payroll costs to 60% in order to potentially obtain full forgiveness, anything less may result in a reduced forgiveness.
To receive loan forgiveness, a borrower must complete and submit a Loan Forgiveness Application to its lender. Great Western Bank will have an electronic application for borrowers to submit all necessary information and upload source documents to support how proceeds were used.
Customers are eligible to apply for PPP forgiveness directly through Great Western Bank’s online portal once the SBA provides final guidelines and the application process is available.
You may use the application released by the SBA as a reference but Great Western Bank will provide customers with access to a Great Western Bank PPP Forgiveness Portal with an electronic application.
Lenders have up to 60 days to make a decision once a complete application has been submitted and the SBA then has an additional 90 days to also make a decision. We will notify you directly once a decision has been made regarding your forgiveness application, including how much is forgiven.
If only a portion of the loan is forgiven, the remaining balance will be due by loan maturity, with the customer making fully amortized payments over the remaining term. For loans made before June 5, 2020, the maturity is two years. For loans made on or after June 5, 2020, the maturity is five years. Additionally, the SBA determined the maturity is based on SBA approval date.
In general, payroll costs paid or incurred during the applicable time period are eligible for forgiveness. Borrowers may seek forgiveness for payroll costs for the applicable time period beginning on either:
- The date of disbursement of the PPP loan.
- The first day of the first payroll cycle in the covered period.
Payroll costs incurred during the borrower’s last pay period of the covered period are eligible for forgiveness if paid on or before the next payroll date, otherwise payroll costs must be paid during the covered period.
Yes. Payroll costs include compensation in the form of salary, wages, commissions, or similar compensation. If you pay furloughed employees their salary, wages, or commissions during the covered period, those payments are eligible for forgiveness as long as they do not exceed an annual salary of $100k, as prorated for the covered period.
No, advance payments of interest on a covered mortgage obligation are not eligible for loan forgiveness.
Yes. If you restore any reductions made to FTEs and/or wages by the end of your covered period, your loan forgiveness amount will not be impacted.
No. So long as you have made a good faith, written offer of the rehire and the employee’s rejection of that offer is documented.
No, as set forth in greater detail in the Interim Final Rule, forgiveness amounts will not be impacted if documentation of the situation is retained and submitted with your forgiveness application.
Payroll costs incurred during the borrower’s last pay period of the covered period or the alternative payroll covered period are eligible for forgiveness if paid on or before the next regular payroll date, otherwise payroll costs must be paid during the covered period to be eligible for forgiveness. The basis of calculation includes both non-payroll and payroll (it’s inclusive of all costs).
Providing an accurate calculation of the loan forgiveness amount is the borrower's responsibility, and the borrower attests to the accuracy of its reported information and calculations on the Loan Forgiveness Application. Great Western Bank is expected to perform a good-faith review, in a reasonable time, of the borrower's calculations and supporting documents concerning amounts eligible for loan forgiveness.
Yes, the grant amount must be disclosed on the forgiveness application and will be deducted from approved forgiveness by the SBA.
The borrower may appeal SBA's determination that the borrower is ineligible for a PPP loan or ineligible for the loan amount or the loan forgiveness amount claimed by the borrower. SBA intends to issue a separate interim final rule addressing this process.
If the amount remitted by the SBA to Great Western Bank exceeds the remaining principal balance of the PPP loan, Great Western Bank must remit the excess amount, including excess interest, to the borrower.
*All information is subject to change based on additional SBA guidance and changes or amendments to the Interim Final Rule.