Answers to PPP and Loan Forgiveness Questions

Date: April 28, 2020

Small businesses are asking: How does the Paycheck Protection Program work? NFIB has the answers.

NFIB has been in close contact with the Small Business Administration since before the PPP opened on April 3rd. We have asked for clarification on key program features and submitted comments and recommendations for improvements. While we are still awaiting additional guidance, here is what we know so far.

NFIB will host a webinar on the PPP on Wednesday, April 29. Registration information can be found here.

Here are the answers to our members’ most frequent questions:
What payments are eligible for forgiveness?

The day you receive a PPP loan marks the start of the eight-week “covered period.” During this window, only costs incurred and payments made for qualifying expenses will be forgiven. For businesses with weekly or biweekly payroll periods, this means eight or four full pay periods.

What are qualifying expenses?
  • Payroll Costs: including salaries (compensation up to $100,000 per employee) and group healthcare benefits, retirement benefits, and state/local taxes on employee compensation. NOTE: At least 75% of loan proceeds must be spent on payroll costs, regardless of timing.
  • Mortgage Interest: Any payment of interest on mortgage obligation (not including any prepayment of or payment of principal) that was incurred before February 15, 2020.
  • Rent: Any payment of rent under a leasing agreement in force before February 15, 2020.
  • Utilities: Any utility payment, including payment for electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020.
What will lower my loan forgiveness amount?

There are at least five scenarios where your loan forgiveness could be reduced:

  • If all loan proceeds are not spent in the 8- week covered period.
  • If you don’t spend at least 75% of loan proceeds on payroll.
  • If you reduce the number of full-time equivalent employees.
  • If employee wages are cut by more than 25%.
  • If you received an EIDL emergency grant.

In many cases, the calculations for loan forgiveness will be complicated. NFIB has also compiled a more comprehensive guide to understanding this issue.

Can I Avoid Forgiveness Reduction?

You can avoid forgiveness reduction by maintaining FTEEs and wages through June 30, 2020. NFIB has asked the Small Business Administration for more information on this issue.

NFIB will continue to work with the Small Business Administration to clarify and strengthen the Paycheck Protection Program. Job creators are counting on the PPP to help them come this crisis, and NFIB will continue to work tirelessly to support our members.

To join NFIB’s Wednesday webinar on the Paycheck Protection Program, please register here. 

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