To Apply for PPP Loan Forgiveness, Get This Paperwork Ready.

June 02, 2020

To Apply for PPP Loan Forgiveness, Get This Paperwork Ready.

On Friday, May 15, the Small Business Administration (SBA) issued the Loan Forgiveness Application for Paycheck Protection Program (PPP) loans along with a list of instructions for completing the application. Last week, we provided a Refresher on Eligible Expenses for PPP Loan Forgiveness. We now turn our attention to documentation the SBA requires you to provide in order to verify your eligible payroll and non-payroll expenses. Before we do that, it’s important to note that recently the U.S. House of Representatives passed legislation that would provide more flexibility in using PPP Loan funds and could impact the current PPP Loan forgiveness guidelines. This legislation now awaits review by the Senate, but it is currently unknown when that will take place. Until any legislative changes become law, we recommend that borrowers be prepared to submit their loan forgiveness documentation under current guidelines, especially if their Covered Period will soon be coming to an end. We will provide updates as this situation continues to evolve.

Payroll Expense Documentation

When documenting payroll expense, you will need to list each employee and the eligible cash and non-cash benefits (aka Payroll Costs), such as insurance premiums, they received during the eight-week (56-day) Covered Period or Alternative Payroll Covered Period. (For purposes of simplicity, references to Covered Period will also include Alternative Payroll Covered Period.) This period can be considered as having started either on the day you received your PPP loan funds or the first day of the next payroll period after you received your PPP loan funds. You can decide which timeframe to use, but be aware that this option only applies to payroll expense.

The SBA requires documentation that verifies the number of employees and their compensation during the Covered Period. Documentation may include:

  • Bank account statements or reports from your payroll service provider
  • Payroll tax filings (IRS Form 941)
  • State income, payroll, and unemployment insurance tax filings
  • Employee health insurance and retirement plan payment receipts, cancelled checks, or account statements showing the amount of employer contributions

If you reduced your number of full-time equivalent (FTE) employees or the average paid hours of your employees between January 1, 2020 and the end of the Covered Period, you will have to provide documentation supporting the average number of FTE employees on payroll per month that you employed. This will be used to calculate whether your loan forgiveness amount must be reduced. The payroll tax filings, as well as state income, payroll and unemployment tax filings listed above will satisfy this documentation requirement. You will need to choose one of the following time periods that this documentation will cover:

  • Between January 1, 2020 and February 29, 2020
  • February 15, 2020 and June 30, 2020

Seasonal employers can choose either of the time periods above or any consecutive twelve-week time period between May 1, 2019 and September 15, 2019. Documents submitted may cover periods longer than the specific time period.

Non-Payroll Expense Documentation

Forgivable non-payroll expenses include payments made during the eight-week (56-day) Covered Period starting the day you received your PPP loan funds for business mortgage interest (not principal), rent and lease agreements, and utilities (gas, electricity, water, transportation, telephone, and internet access), as long as the agreements were in force, and the services were being provided, before February 15, 2020. The following can be used to verify payments made for these items:

  • Business mortgage interest payments: Copies of your lender’s amortization schedule and receipts or cancelled checks, or you can provide copies of account statements provided by the lender from February 2020 through one month after the end of the eight-week period.
  • Business rent and lease payments: Copies of the lease agreement and receipts or cancelled checks, or account statements provided by the lessor from February 2020 through one month after the end of the eight-week period.
  • Utility payments: Copies of invoices and receipts, cancelled checks, or account statements from February 2020 through one month after the end of the eight-week period.

Important Notes

  • Some documentation may not be available immediately after the end of the Covered Period. This time gap will affect when you can complete and submit your PPP Loan Forgiveness Application.
  • It is likely that you will need to provide this documentation in digital format, so you will need to scan documents that only exist in hard copy.
  • You must retain this loan documentation for six years after the date the loan is forgiven or repaid in full.

We hope you find this information helpful. If you have questions or would like more details, please call your ENB Relationship Manager or our Customer Service Center at (717) 733-4181.

 This information is guidance from the Small Business Administration (SBA) in consultation with the Department of the Treasury as of May 15, 2020. As always, you are encouraged to seek independent accounting and legal advice on decisions that require such professional reviews and to assist you in determining your priorities.

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