PPP Loan Forgiveness


As Paycheck Protection Program (PPP) loan borrowers use their proceeds to reboot their small businesses, it is important to be aware of the SBA's requirements for full forgiveness of the repayment obligation. At least 60% of the loan amount must be spent on eligible payroll costs during the 24-week period following the date the loan is funded. Any portion of the loan that is not used for payroll must be spent on rent, mortgage interest, or utility payments from agreements in place prior to February 15, 2020. The use of the loan for these payments can aggregate to no more than 40% of the loan amount in order to be fully forgiven because at least 60% of the loan amount must be spent on eligible payroll costs.

Chain Bridge Bank will utilize an online portal to process all forgiveness applications; it will not accept paper forgiveness applications owing to the inefficiency of processing these.

When disbursing the loan proceeds toward payroll costs, borrowers should note that the same criteria that defined eligible payroll costs for the loan amount apply toward qualification for loan forgiveness. These include the exclusion of cash compensation above $100,000 annually, which applies to bonuses and hazard pay. The business should attempt to rehire its employees that were let go after February 15, 2020, as any reductions in staffing or payroll could reduce the amount of loan forgiveness. If a former employee declines the offer to be rehired, or the business cannot find a qualified worker to fill the position, the borrower will have a safe harbor from any loan forgiveness reduction. The borrower will also have a safe harbor from loan forgiveness reduction if business operations cannot resume to the level as of February 15, 2020 owing to public health requirements or guidelines from the federal government. The SBA and Treasury will be publish guidance to clarify these terms that were part of the Paycheck Protection Flexibility Act that recently became law. These are other important terms to be aware of:


  • The time period for using the loan for eligible payroll cost is 24 weeks from the date of the loan, and no later than December 31st, 2020.
  • Payroll and other eligible payments that are incurred during the covered forgiveness period may be paid after the period ends at the first regular payroll or billing date;
  • The deadline for rehiring workers laid off due to the pandemic has been extended from June 30 to December 31, 2020;
  • A borrower's potential loan forgiveness will not be reduced if an employee resigns, is terminated for cause, or requests a cutback in hours.

When it opens its loan forgiveness portal, Chain Bridge Bank will need documentation that borrower loan proceeds were used for the eligible expenses of payroll costs, mortgage interest, rent, and utilities. Clients should retain records for this requirement and have them ready at the end of covered period following the loan date for the Bank to begin the forgiveness process. These documents will include payroll records, lease or mortgage interest payments and receipts, and utility bill payments and receipts.

Clients are advised to consult their payroll service provider such as ADP  or Paychex on any specific documentation they may be offering to help clients with PPP loans verify their forgiveness eligibility.

 It is also important to understand the term pertaining to loan amounts that ultimately are not forgiven by the SBA:

  • Principal and interest payments are deferred for the borrower until any loan amount forgiveness is remitted by the SBA;
  • The loan carries an interest rate of 1% and matures in two years if approved prior to June 5th or five years if approved on or after that date;
  • Accrued interest on the forgiven amount of the loan is forgiven.

Because this is not legal or accounting advice, Chain Bridge Bank encourages PPP borrowers to consult their attorneys and accountants for such advice pertaining to loan forgiveness.

Clients can contact their Chain Bridge loan officer or email sbaloans@chainbridgebank.com for any questions or concerns about what the Bank will need for processing loan forgiveness applications when its online portal opens.


This is not a commitment to make a loan.


Potential borrowers can consult the U.S. Treasury's Paycheck Protection Program page or the SBA site for further details
about the loan rules, requirements and frequently asked questions (FAQs).

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