The largest advantage of the PPP is the ability to have your loan forgiven so you are not obligated to make interest or principal payments. This will require following the SBA's program rules and maintaining good records proving that you have followed those rules.
You will be able to let us know in week seven of your loan if you want to apply for forgiveness and make that application for forgiveness in week eight. To have your loan forgiven either in whole or in part, you must meet the following rules:
At least 75% of your PPP loan funds must be used for payroll costs.
No more than 25% of your PPP funds can be used for non-payroll purposes
Remember! The following payroll costs are not eligible for loan forgiveness but you should be keeping track of these:
To receive your highest loan forgiveness, you must maintain the number of employees (full-time equivalents) on your payroll.
If you are self-employed:
Keep a thorough, running list of all documentation that will need to be submitted by you to Thomaston Savings Bank for a complete loan forgiveness application. Items may include the following:
Documents verifying your number of FTEs on payroll and their pay rates for the periods used to verify you’ve met the staffing and pay requirements:
Documents verifying your eligible interest, rent, and/or utility payments including but not limited to:
We will ask you remit these documents electronically. If these documents are not already in digital form, take the time to scan them and get them ready for upload using an Adobe PDF file format.
A successful forgiveness application requires good record keeping and bookkeeping in order to maximize your loan forgiveness amount. Keep diligent track of all eligible expenses and their accompanying documentation for the 8-week period. As we near the forgiveness period, we will you be contacting you with additional information on how to submit your forgiveness application. It is recommended that you consult with your tax advisor, legal counsel, or a bookkeeping service to assist your business if necessary.
Depending on your payroll schedule and systems, you may want to adjust the timing of your payroll date to accommodate as many payroll cycles as possible, since it appears that forgiveness is calculated on a cash, not accrual basis. As such, keeping all cash payroll payments within the eight-week test period window makes cash flow more manageable. For example, if your PPP loan got deposited in your bank account on April 30, you could only use the funds on expenses incurred during the eight weeks following April 30.
Be aware that if you pay any single employee (including yourself) more than $3,846.15 per 2-week pay period (an annualized $100,000 per year) that amount will not count towards the loan forgiveness. At time of this posting, the SBA has been vague about the exact way ineligible pay is deducted from the forgiveness amount, so, for best results, be conservative.
If you received a grant up to $10,000 from the Economic Injury Disaster Loan (EIDL) program, these proceeds will be deducted from your PPP forgiveness amount. For example, if you have a $10,000 EIDL grant and a $100,000 PPP loan in which you qualify for 100% forgiveness, then your forgiveness amount will be $90,000 and you will then be required to pay off the $10,000 remaining over the term of the loan.
Check back soon for a toolkit that will help you to calculate the forgivable amount of your PPP loan.