PPP Loan Forgiveness Application Process

As your business is in the first stages of opening back up, we created a helpful video to outline the application process for the PPP (Paycheck Protection Program) loan forgiveness. In our video, our founding partner, Jay Shorr, walks you through the PPP loan forgiveness application and the documentation required.

The application consists of 11 lines that when calculated result in the amount of forgiveness you are eligible for. One very important piece of information is that the funds received from this loan must be used for payroll, business mortgage interest, rent, and utilities.

There are three parts involved in the calculation of your loan forgiveness.

• Part 1: Submit your payroll and qualifying non-payroll cost that the business has spent over the 8-week period since your PPP loan was received.
• Part 2: There may be a reduction in the forgiveness amount if you reduced your wages for employees by greater than 25%, or if you have not brought back the same number of full-time employees as before the 8-week period. You have until June 30th to bring back all of your previous full-time employees.
  • If you are not able to bring back all of your employees, the application provides a waiver of reduction.
• Part 3: 75% payroll cost test. This test is to ensure that your forgiveness request is comprised of at least 75% of your payroll cost. The other 25% is for mortgage interest, rent, and utilities.
  • To calculate your forgiveness amount under the 75% cost rule you take the average number of hours paid each week, for each employee, and divide that by 40, and round it to the nearest tenth.
  • If the request exceeds 75% you will take the amount of payroll cost and divide that by .75 and that number will give you the total forgiveness amount.

There are a few more documents required for the PPP loan application, listed below:

• PPP Schedule A Worksheet: In this form, you must identify each employee that was paid during the 8-week period, as well as employees paid at an annual rate below.
  • Employees paid over $100,000 annually and the business owner’s annual income will be calculated on another document.
  • The max cash compensation forgiven is $15,385 and this is not including health insurance or retirement contributions.
• If you are on a bi-weekly payroll you require additional information:
  • You must submit 3^rd party payroll service reports, if applicable.
  • Tax forms for the period that overlaps the alternative payroll period (941 tax form).
  • Have proof of quarterly wages and unemployment fillings. Payment receipts, canceled checks, or account statements that document the amount paid for employee health insurance and retirement plans.
  • Payment receipts, canceled checks, or account statements that document the amount paid for employee health insurance and retirement plans.

The final section of documentation is for rent, mortgage interest, and utilities:

• To verify rent payments you have to submit a copy of your lease agreement and payments to your landlord.
• To verify your mortgage obligations, you must provide the lender amortization schedule of the loan or mortgage and a receipt of payments from February 20^th or during the 8-week period covered after you received the PPP.
• Lastly, for proof of utility payments, you have to submit an invoice from February 20^th showing the utility services, and a bank statement showing proof of the payment.

The PPP loan forgiveness application process can be a little confusing, so our best piece of advice is pay attention to detail!