Please review this information in its entirety before attempting to apply for forgiveness for your Small Business Administration (SBA) Paycheck Protection Program (PPP) loan.

FIRSTBANK PROCESS

We will be using an online application portal for the forgiveness application process, similar to what was used for the initial loan application.  We are not yet accepting forgiveness applications as we await additional information from the SBA to finalize our process.  We will provide updates to our customers as the information becomes available.

TAX/ACCOUNTING ADVICE

FirstBank is providing this general information as a courtesy to assist you in requesting forgiveness from the SBA for your loan and should not be construed as tax or legal advice. You should consult with your CPA, tax advisor, financial advisor or attorney for tax and legal guidance related to your specific circumstances.

GENERAL OVERVIEW

While FirstBank will assist in the forgiveness application process, the amount of loan forgiveness is determined solely by, and is subject to, the sole approval of the SBA. Additionally, the amount of loan forgiveness as determined by the SBA may be less than the loan amount.  In this case, the business will be fully responsible to pay the remaining balance.

The Paycheck Protection Program Flexibility Act (PPPFA) of 2020 was signed into law on June 5th. Among the changes made by the PPPFA are:

  • increasing the amount of loan proceeds able to be spent on non-payroll costs from 25% to 40%;
  • extending the “covered period” during which borrowers can spend forgivable expenses from 8 weeks to 24 weeks (although borrowers can choose to use the original 8 week period);
  • extending the loan maturity date on post PPPFA loans from two years to five years; and
  • extending the deadline for rehiring employees to December 31, 2020 (up from June 30, 2020).

On June 17th, the SBA released additional guidance pertaining to the PPPFA, including an update to the PPP loan forgiveness application. There are now two separate application forms which reflect borrower-friendly changes to the forgiveness calculations contained within the PPPFA.  While these are positive changes for most borrowers, there is additional guidance pending related to open questions regarding how forgiveness will be determined for certain borrowers.

We continue to encourage you to check the SBA Website regularly for the most up to date information. 


REQUIRED DOCUMENTATION

It is of utmost importance to maintain accurate accounting and documentation on the use of all proceeds over the applicable period.  As part of the application process, you will be required to provide supporting documentation for expenses incurred.  Current SBA guidance states that all supporting documentation, whether submitted with the application or not, must be maintained for six (6) years after the loan is forgiven or repaid in full, and must be made available to the SBA and it’s representatives upon request.

The information on forgivable costs has not changed and is summarized below.

WHAT IS INCLUDED IN FORGIVEN PAYROLL COSTS?

The following items are currently considered eligible payroll costs under the SBA PPP:

  • Salary, wages, commissions or similar compensation including payments made to owners
  • Payment of cash tips or equivalent
  • Payment for sick, vacation, parental, family or medical leave
  • Dismissal or separation allowance
  • Payments for group health care benefits, including insurance premiums
  • Payments for retirement benefits
  • Payments of state or local tax on employee compensation

Total payroll costs are capped at $100,000 on an annualized basis for each employee, based on the actual payments made during the covered period.

The payroll costs must either be paid during the covered period or incurred during the covered period.  Payroll costs are considered to be incurred on the day they are earned by the employee, and the must be paid on the next regular payroll date.

WHAT ARE FORGIVABLE MORTGAGE AND RENT OBLIGATIONS?

Interest payments on a business mortgage or business rent payments made during the covered period after you receive the loan proceeds are eligible for forgiveness. The mortgage or rent agreement must have been in place prior to February 15, 2020 to be eligible. A couple of things to note:

  • Only mortgage interest payments, not principal payments, are eligible
  • Mortgage is defined as any debt secured by real property or business personal property

WHAT ARE COVERED UTILITY PAYMENTS?

Payments for a service for the distribution of electricity, gas, water, transportation, telephone or internet access. The services must have been in place before February 15, 2020.

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