The Next Step for Small Businesses: Preparing for PPP Loan Forgiveness

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If your small business received a Paycheck Protection Program (PPP) Loan, the next step is preparing for forgiveness of your loan. SBA loan forgiveness is not automatic. You’ll need to apply with the bank from whom you received your PPP funding, and there are a number of requirements.

If you’ve received a PPP Loan, First Bank of Wyoming encourages you to take some time to review the SBA’s Loan Forgiveness Application in its entirety. For now, here are the top 4 things you need to know about PPP Loan Forgiveness and the SBA’s application and related worksheets:

PAYROLL PERIOD FLEXIBILITY

The SBA is offering flexibility regarding the “covered period” for payroll during the eight-weeks (56 days) of payroll spending:

  • You may choose to calculate payroll costs using an eight-week period starting the day your loan was funded OR use and “alternative covered period” that better aligns with your normal payroll cycle.  For example, if you pay your employees bi-weekly, you can start your “alternative payroll covered period” on the first day of your business’s first pay cycle following disbursement of your loan. This may be easier for you to calculate your total payroll costs in the loan forgiveness application.  Note: the first day of the Covered Period is the same day the PPP Loan Funds were disbursed to the borrower; for example dates, please reference the example dates provided on page 1 of the SBA’s forgiveness application.

EXPENSES PAID AND INCURRED

Costs eligible for inclusion in your forgiveness application include expenses paid and incurred:

  • Payroll costs incurred but not paid during the last pay period of the covered period or alternative covered period may be eligible for forgiveness if paid on or before the next payroll date.
  • Eligible non-payroll costs must be paid during the covered period or incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period.

FTE REDUCTIONS

The SBA issued guidance on full-time equivalent (FTE) reductions that can be exempted from forgiveness calculation, if not filled by new hires.  You may be able to exclude the following situations from forgiveness calculations:

  • Any positions for which you made a good-faith offer – in writing – to rehire an employee during the covered period which was rejected by the employee;
  • Any employees who, during the covered period, were fired for cause, voluntarily resigned, or voluntarily requested and received a reduction of their hours.

 

RESTORING FTE LEVELS BY JUNE 30

The SBA has indicated that it will allow a safe harbor exemption from loan forgiveness reduction if you restore FTE by June 30, 2020.  This safe harbor applies if the following two conditions are met:

  • You reduced your business’s FTE employee levels in the period beginning February 15, 2020, and ending April 26, 2020;

AND

  • You then restored FTE employee levels by no later than June 30, 2020, to the FTE employee levels in the pay period that included February 15, 2020.

 

The SBA has not provided specific information regarding the timing for submitting your loan forgiveness application. You should not feel rushed to apply for forgiveness immediately, but First Bank of Wyoming recommends that you begin gathering the required documentation now. Please reference Page 10 of the SBA’s Loan Forgiveness Application for a listing of all documentation requirements.

If you have any questions, be sure to reach out to your lender.

First Bank of Wyoming will be posting more information soon regarding PPP Loan Forgiveness to their website, www.GoFirstBank.com. Be sure to check back often, as information will likely be updated frequently.

Please keep in mind that these are just a few of the things that will need to be considered when taking the steps to qualify for PPP loan forgiveness.  The decision for full or partial forgiveness of your PPP loan is at the sole discretion of the SBA.  First Bank of Wyoming, a Division of Glacier Bank, cannot offer an opinion on whether your loan will qualify for forgiveness.

First Bank of Wyoming | 601 N Front Street in Rock Springs | 307.362.5601


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