UPDATED MAY 18, 2020 AT 5:45PM
PAYCHECK PROTECTION PROGRAM (PPP) LOAN FORGIVENESS GUIDELINES*
* SBA Guidelines for PPP Loan Forgiveness are pending. This page will be updated upon issuance.
As debt forgiveness is the key feature of the PPP loan, we wanted to ensure that use of the loan proceeds allows borrowers to remain fully eligible to maximize this opportunity. The program requires that each PPP borrower maintains - or quickly rehires - employees at existing salary levels. The SBA has advised that a borrower’s forgiveness opportunity will be reduced if its full-time headcount declines, or if salaries and wages decrease.
In order to qualify for PPP Loan Forgiveness, you must apply to Lakeland Bank after 8 weeks from receipt of loan funds.
Each PPP loan borrower will be receiving an email notification prior to the time to apply for forgiveness. The notice will include a link to your required application documentation. DO NOT APPLY PRIOR TO THIS TIME.
The funds must have been used for payroll costs, mortgage interest, rent, and utility payments over the 8-week period after getting the loan in order to be considered for forgiveness.
REMEMBER THAT 75% OF THE PPP PROCEEDS MUST BE USED FOR PAYROLL.
During the eight-week period after your loan is disbursed, track everything you spend your PPP funds on. Make sure the items map back to the list of forgivable expenses, and track how much you’re spending on non-payroll costs to get an idea of how much of your loan will be eligible for forgiveness (try to keep non-payroll costs under 25% of the full amount you spend).
In your application for loan forgiveness, you must document the following:
- Salary, wages, commission or similar compensation (recent SBA guidance states that payroll costs include all cash compensation, including a housing stipend or allowance)
- Payments for vacation, parental, family, medical or sick leave
- Allowance for dismissal or separation
- Payments for the provision of group health care benefits, including insurance premiums
- Payments for retirement benefits
- State or local payroll taxes
- Interest payments on a mortgage incurred in the ordinary course of business on real or personal property and that was in existence on Feb. 15, 2020
- Rent payments under leasing agreements in existence on Feb. 15, 2020
- Utility payments for electricity, gas, water, transportation, telephone or internet for which service was in existence on Feb. 15, 2020
Examples of documentation that would evidence expenditures:
- A record of the number of full-time employees and pay rates your business maintains during the eight-week loan period, via the following documentation:
- Payroll tax filings with the IRS
- State income, payroll, and unemployment insurance filings
- Proof of payment, including cancelled checks, receipts, and other documentation that verifies payments for mortgage, lease, and utility payments
Additionally, a certification that all the information you provide is accurate and that your loan was used to retain employees, or make rent, mortgage, or utility payments will be required.
For payroll expenses to be eligible for full forgiveness, you must meet two criteria:
- The full-time employee head count cannot decline from average monthly levels during 2019 or during the past 12 months. If your business launched in the second half of 2019, you can use average head counts from January 1, 2020 to February 29, 2020. If your business is seasonal, you can base your monthly averages on numbers from February 15, 2019 or March 1, 2019 to June 30, 2019.
- Full Time Reduction Elimination Test: Make sure the number of full-time employees on 6/30/20 is the same as it was on 2/15/20.
- Employers cannot cut salaries or wages. If they do, the forgiven amount will be reduced. Employers who already let workers go (between February 15 and April 26, 2020) have until June 30 to re-staff.
- Salary and wage reduction elimination test: On 6/30/20 make certain all individuals who fall below $100,000 annually, have the same pay as compared to 2/15/20.
Although generally described above, we encourage you to refer to the Interim Final Rules governing the program and SBA’s Frequently Asked Questions to ensure adherence to the program’s forgiveness eligibility requirements.
All borrowers should review carefully the required certification that "current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant." Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 18, 2020 will be deemed by SBA to have made the required certification in good faith.
All loans above $2 million will be audited by the SBA to ensure that they were made to eligible borrowers in need.
Economic Injury Disaster Loans (EIDL)
If your business has been impacted or is suffering substantial economic injury because of the Coronavirus COVID-19 pandemic & is located in a declared disaster area, you may be eligible for a low-interest disaster assistance loan through the Small Business Administration (SBA). These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
Follow this link for information and how to apply through the SBA.
New Jersey Business Portal
In addition, New Jersey has created a website for businesses to find resources. There is a chat bot (live chat) where you can ask questions and receive answers in a timely manner. Businesses may also call 1-800-JERSEY-7.