Are forgiveness applications open?
Yes! The SBA is currently taking forgiveness applications. Apply for forgiveness here:
What are the terms of Second Draw PPP Loan Forgiveness?
Second Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following loan disbursement:
- Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- At least 60% of the proceeds are spent on payroll costs
How can these funds be used?
- Payroll costs
- Cash tips
- Vacation payments
- Employee benefits (healthcare and retirement benefits, as well as group life, disability, vision, or dental insurance)
- State and local taxes assessed on compensation of employees
- Non-payroll costs
- Mortgage interest payments (not including payments on the mortgage principal)
- Covered operations expenditures (business software or cloud services that facilitate business operations including payroll processing, sales & billing and other accounting expenses)
- Covered property damage costs (related to property damage and vandalism or looting due to public disturbances that occurred during 2020 not covered by insurance or other compensation);’
- Covered supplier costs (those that are essential to the operations of the entity at the time at which the expenditure is made and are made pursuant to a contract or purchase order)
- Covered worker protection expenditure (an operating or capital expenditure to facilitate the adaptation of your business activities to comply with pandemic requirements or guidance from federal, state or local governments)
- Expenses Not Eligible
- The amount of cash compensation of an individual employee in excess of $100k annually, prorated
- Payroll for employees whose principal place of residence is outside the U.S.
- Interest paid on unsecured debt obligations other than payroll, mortgage, rent or utilities
- Mortgage / loan prepayments of payment of principal
- Inventory, capital expenditures, technology investments, car or vehicle payments, etc.
- Compensation paid to independent contractors
Borrowers who use loan proceeds to cover these costs will be 100% forgiven if at least 60% of the loan is used toward qualifying payroll costs and the rest of the loan is used toward the other uses listed above (also known as “non-payroll costs”). If funds go toward any non-covered expenses, then that portion will not be forgiven.
Over what period of time does my business need to incur eligible expenses to qualify for forgiveness?
Eligible expenses incurred over the 8 to 24 week period can be forgiven, starting from the day you receive your PPP loan. As a reminder, this is not necessarily the date on which you signed your loan agreement.
You do not need to adjust your payroll schedule. All payroll incurred over the 8 to 24 week period is eligible for forgiveness, even though your actual payroll dates falls outside the covered period.
What information should I gather before applying for forgiveness?
- Evidence of at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020 (for PPP Second Draw Borrowers)
- Requested PPP Loan Amount
- Amount of Loan spent on Payroll Costs
- Requested Forgiveness Amount
- NAICS Code
- Number of Employees
- Employees at the time of Forgiveness Application
- Business Information (including Contact Info, Identification, Ownership Information, etc.)
- Primary Contact Information
- Loan Disbursement Date (Start of Covered Period)
- Choose your Covered Period end date (choice between 8 and 24 weeks from disbursement date)
What key dates should I understand?
- Apply for Forgiveness – once all loan proceeds for which you are requesting forgiveness have been used
- Banker Review – Northwest Bank & Trust has up to 60 days to complete its review after you submit your application
- SBA Review – SBA has up to 90 days to complete after the bank submits your application to the SBA
- Loan Payments Deferment ends and payments begin – 10 months after completion of Covered Period (for example, a borrower whose covered period ends on October 30, 2020 has until August 30, 2021 to apply for forgiveness before loan repayment begins)