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Frequently Asked Questions About the PPP Forgiveness

Latest update 7/1/2020.

How will I be notified when the Forgiveness Application portal is available?
An email will be sent to all borrowers once the portal is available.

When do I submit my loan forgiveness application?
We anticipate that we’ll begin accepting PPP loan forgiveness applications beginning mid-July.

We are building the digital loan forgiveness application as we await expected program changes and further guidance from the SBA. CPB will provide adequate resources to assist with submitting loan forgiveness applications.

What is the deadline to apply for loan forgiveness and when will I have to begin paying principal and interest on my PPP loan?
The deadline to apply for forgiveness is 10 months after the expiration of your covered period. For example, if your loan was funded on June 25 and you choose a covered period of 24 weeks (which would conclude December 10), the deadline to submit your forgiveness application would be 10 months later (or October 10, 2021). If you submit your loan forgiveness application within 10 months after the end of your loan forgiveness covered period, you will not have to make any payments of principal or interest on your loan before the date on which SBA remits the loan forgiveness amount on your loan to your lender (or notifies your lender that no loan forgiveness is allowed).

If you do not submit to your loan forgiveness application within 10 months after the end of your loan forgiveness covered period, you must begin paying principal and interest after that period. For example, if a borrower's PPP loan is disbursed on June 25, 2020, the 24-week period ends on December 10, 2020. If the borrower does not submit a loan forgiveness application to its lender by October 10, 2021, the borrower must begin making payments on or after October 10, 2021.

When is the webinar, which will guide us in completing the PPP forgiveness application?
The webinar is being planned for mid-July, pending issuance of final guidance from the SBA. PPP borrowers will be sent an email invitation to the online event. If you’re unable to attend, a recording will be made available.

How do I login to the forgiveness application portal?
When the portal becomes available, you’ll be able to log in depending on when you applied for your PPP loan.

  • If you applied on or before April 16 – you will need to create a login ID and password
  • If you applied on or after April 24 – you can use the same login ID/password that you established at the time of applying for your PPP loan

How do I apply for PPP loan forgiveness?
All applications will need to be submitted via an online portal, that will be made available on our website in mid-July.

This portal will only be available for customers who received their PPP loan from Central Pacific Bank.

The SBA has provided two samples of the loan forgiveness applications.

  1. New EZ Loan Forgiveness Application applies to borrowers that:
    • Are self-employed and have no employees; OR
    • Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number of hours of their employees; OR
    • Experienced reduction in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%
    • You can view a copy of the EZ Form and EZ Form Instructions here for informational purposes only. 
  2. For all other PPP borrowers, please view the Full Application Form and Full Application Form Instructions also for informational purposes only.

IMPORTANT NOTE: We will only accept online application via our Forgiveness Application portal. So please do not send a paper copy of these application.

Is there a resource guide available?
A list of documents will be made available on the CPB website, based on your entity type along with a comprehensive guide with useful resources to guide you through the process. Please click here to view the guide.

You can also check out the FAQ section on the Treasury’s website or consult your CPA/Accountant for help with your particular situation.

How will I be notified if my forgiveness application was approved?
You will receive an email notification once your forgiveness application has been reviewed, confirmed complete, submitted to the SBA for final approval AND we receive official forgiveness. The bank has up to 60 days to review the application and if approved, the SBA has up to 90 days to give final approval.

What is the criteria to be eligible for a Forgivable loan?
The PPP loan was designed for small businesses to keep people employed. Therefore,

  • Payroll costs must be at least 60% of the loan
  • Utilities and other expenses must not exceed 40% of the loan
  • Expenses must occur in the covered period (earlier of 24 weeks from the date of loan funding or December 31, 2020); the Alternative Payroll Covered Period may be used so that the covered period for payroll expenses incurred on a biweekly or more frequent payroll cycle aligns with such payroll cycle.

Refer to the Treasury’s website for complete information.

What are the main changes to the Paycheck Protection Program Flexibility Act (PPPFA) passed on June 5, 2020?
The PPPFA provides the borrower with greater flexibility to obtain maximum forgiveness. This table compares the before and after changes:

Item Original PPP Guidelines NEW Guidance under PPPFA
(Effective June 5, 2020)
Payroll At least 75% of PPP must be spent on payroll At least 60% of PPP must be spent on payroll
Time Period to use funds (Covered Period) 8 weeks 8 or 24 weeks
  • Borrowers must choose either period but must maintain staffing and salary levels for whatever period they choose. Once the Covered Period has ended, borrowers can run their business without impact to the forgiveness amount. In addition, if your PPP loan was approved by the SBA on or after 6/5/20, you are only able to select a 24 week covered period. The 8 week or 24 week options are only available if your loan was SBA approved before 6/5/20.
Owner Compensation Replacement (For businesses without employees) Limited to eight weeks’ worth of 2019 net profit (up to $15,385) 2.5 months’ worth (2.5/12) of 2019 net profit (up to $20,833) for a 24-week covered period.
Rehire Requirements(for salary to count toward requirements) Workers must be rehired by June 30, 2020 Workers must be rehired by December 31, 2020
Exceptions:
  • Unable to rehire individual who was an employee on or before 2/15/2020
  • Able to demonstrate inability to hire similarly qualified employees on or before 12/31/2020
  • Able to demonstrate inability to return to same level of business activity as before 2/15/2020
Repayment Term 2 years (at 1% interest) 2 or 5 years (at 1% interest)
  • PPPFA Loans made on or after June 5, 2020, will have a 5-year maturity.
Deferment of payroll taxes No deferment of taxes on forgivable portion of the loan PPPFA allows borrowers to defer the employer portion of payroll taxes until December 31, 2020.

 

What documents will I need to provide for my PPP loan to be forgiven?

For your convenience, we have compiled a list of required documents based on type of entity. Please click here to view the list.

How is my payroll cost calculated and what documents do I need to provide if I am sole Prop/Independent Contractor?
You are entitled to use the PPP loan to replace lost compensation due to the impacts of COVID-19. Eight weeks’ worth of your 2019 net profit will be eligible for forgiveness or 2.5 months’ worth (2.5/12) of 2019 net profit (up to $20,833) for a 24-week covered period. If you have mortgage interest, rent, or utilities expenses, you must have claimed or be entitled to claim a deduction for those expenses on your 2019 Form 1040 Schedule C in order to claim them for forgiveness.

What is the “Covered Period”?
The first day of the Covered Period must be the same as the PPP loan funds disbursement date and is based on a 24-week (168-days) period or December 31, 2020, whichever is first.

Example: if your loan is disbursed and your check is cut on April 20th, the first day of the Covered Period is April 20th and the last day is October 4th (168-days period).

What is the “Alternative Payroll Covered Period”?
Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the 24-week (168-days) period beginning on the first pay period following their loan disbursement. Example: if your loan is disbursed on April 20th, the next pay period is on April 26th and thus the last day would be October 10th.

What is the time period for Forgivable Payroll Costs?
Borrowers are generally eligible for forgiveness for payroll costs paid and payroll costs incurred during the 24-week (168-days) Covered Period or Alternative Payroll Covered Period.

  • Payroll Costs Paid = Day paychecks are distributed or when ACH credit transaction is originated
  • Payroll Costs Incurred = Day the employee’s pay is earned

What are the Forgivable Non-Payroll Costs and for what time period?
Non-payroll Costs eligible for forgiveness must have been in place before February 15, 2020.

  • Mortgage Interest on any business mortgage obligation on real or personal property.
  • Business rent or lease payments for real or personal property.
  • Utility payments for businesses with service for electricity, gas, water, transportation, telephone or internet.

Are salary, wages, or commission payments to furloughed employees; bonuses; or hazard pay during the covered period eligible for loan forgiveness?
Yes. If a borrower pays furloughed employees their salary, wages, or commissions during the covered period, those payments are eligible for forgiveness as long as they do not exceed an annual salary of $100,000, as prorated for the covered period.

Can I deduct any EIDL Advance amount from the PPP amount we received?
If you received a grant up to $10,000 from the Economic Injury Disaster Loan (EIDL) program, these proceeds will be deducted from your PPP forgiveness amount. For example, if you have a $10,000 EIDL grant and a $100,000 PPP loan in which you qualify for 100% forgiveness, then your forgiveness amount will be $90,000, and you will then be required to pay off the $10,000 remaining over the term of the loan.

Do I need to submit the PPP Schedule Worksheets?
You may need to provide a copy of the Schedule A Worksheet of the Loan Forgiveness Application if the SBA asks to review your loan. All documentation submitted for forgiveness must be retained for 6 years after the date the loan is forgiven or repaid.

How do I fill out the PPP Schedule A Worksheet?

To make it easier to apply for forgiveness when our online portal opens, we recommend preparing all the information required in the Forgiveness Application in a worksheet.  Some organizations such as the AICPA are providing loan forgiveness calculators/worksheets which are publicly available and free of charge.  If you use such a calculator/worksheet you should confirm it is current with the latest PPP forgiveness rules, and be advised that you remain fully responsible for the accuracy, correctness and completeness of your forgiveness information, calculations and submission to your lender and SBA.  Here is a link to their calculators:

Calculator 1: https://future.aicpa.org/resources/download/ppp-loan-forgiveness-calculator-excel

Calculator 2: https://future.aicpa.org/resources/download/self-employed-ppp-loan-forgiveness-calculator

What are the tax consequences of PPP loan forgiveness?
This is a good question to check with your tax professional as the response can be complicated. The IRS recently issued Notice 2020-32, which can be viewed here.

 

This communication is as of July 1, 2020 and is intended to assist PPP applicants/borrowers in understanding and complying with the Paycheck Protection Program (“PPP”) laws, regulations, requirements and rules (collectively “PPP Rules”).  This is only a general description/summary of the matters covered herein. PPP applicants/borrower should consult the PPP Rules for the complete coverage. Central Pacific Bank (“CPB”) is not rendering any legal, tax, accounting, business or other advice to PPP applicants/borrowers in connection with the PPP which is a federal government program and subject at all times to the PPP Rules as they may be changed, amended or supplemented at any time by the federal government.  PPP applicants/borrowers are strongly encouraged to seek the advice of legal, tax, accounting, and other professional advisors respecting the PPP.  PPP applicants/borrowers are solely responsible for determining their eligibility for the PPP and compliance with all PPP Rules, and shall not rely on CPB or any employee or representative of CPB respecting the PPP Rules or any interpretation or application thereof. CPB has no obligation or responsibility to update this communication as additional PPP Rules are issued or if any PPP Rules are changed, amended or clarified. PPP applicants/borrowers must monitor the government’s PPP websites at https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses and https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program for any updates to the PPP Rules.

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