As you prepare to use your Paycheck Protection Program (PPP) loan proceeds to help your small business, it is important to be aware of the SBA's requirements for forgiveness of your repayment obligation. Most importantly, at least 75% of the loan amount must be spent on payroll costs during the eight-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 15th. The use of the loan for these payments can aggregate to no more than 25% of the loan amount in order to be fully forgiven because at least 75% of the loan amount must be spent on eligible payroll costs.
When disbursing the loan proceeds toward payroll costs, 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. The business must also retain or quickly rehire its employees that were let go after February 15th. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
Chain Bridge will need documentation that your loan proceeds were used for the eligible expenses of payroll costs, mortgage interest, rent, and utilities. Please retain records for this requirement and have them ready at the end of the eight-week 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.
You are advised to consult your 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.
- All loan amounts that are not forgiven by the SBA come with a six-month deferral of payment of interest and principle.
- The loan matures in two years and carries an interest rate of 1%.
- Accrued interest on the forgiven amount of the loan is also forgiven.
Because this is not legal or accounting advice, the Bank encourages you to consult your own attorneys and accountants for such advice pertaining to loan forgiveness. The SBA has outlined its requirements for forgiveness in Section O of the current PPP guidance. The SBA and Treasury have said additional guidance about loan forgiveness is forthcoming. Chain Bridge will notify you of those details as soon as they are published.
You may contact your Chain Bridge loan officer or email firstname.lastname@example.org in the meantime if you have any questions or concerns about what the Bank will need.
Thank you for choosing Chain Bridge Bank, N.A. as your PPP lender and relationship bank.
This is not a commitment to make a loan.