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CARES Act – PPP Program Loan Forgiveness Update


Paycheck Protection Program Forgiveness Rules

Disclaimer – The  following information is based on current information available and is preliminary in nature pending final guidance from the SBA.

Many of you have now been approved for a Paycheck Protection Program Loan (PPP) and many have already received the funds from the government in your bank account.  For those of you who have not been approved please be patient as it is our understanding the second round of funding will begin this week (if you have not applied or do not have an approval it is still first come first serve so please get your application to your bank ASAP).

As most of you know these loans can be forgiven.  Unfortunately the forgiveness process and tracking is going to be significantly more complicated.  These rules are fluid and we will be providing updates as we learn more but the below is what we know thus far.

Please note working with your lending institution is very important as each bank may interpret these rules differently and understanding your bank’s interpretation is crucial to ensure that you maximize the amount of your loan which is forgiven.

What are the requirements?

You must use at least 75% of the proceeds for payroll costs.  The other 25% can be used on utilities, rent and mortgage interest that were in effect before February 15, 2020.

The loan proceeds are to be used to cover these costs over the 8-week period after the loan is made.

Employee counts or compensation levels must be  maintained or restored to maximize the forgiveness amount.

How much of the loan is eligible for forgiveness?

Up to 100%, if the above requirements were met.

What is included in Forgiven Payroll Costs?

  • Salary, wage, commissions

  • Payment of cash tips 

  • Payments for sick, vacation, parental, family or medical leave.

  • Dismissal or separation allowance

  • Dollars for group health care benefits, including insurance premiums

  • Payments for retirement benefits

  • Payment of state or local tax on employee compensation.

  • Notes On Mortgage and Rent Obligations

    • Only mortgage interest payments, not principal are eligible.

    • Mortgage or lease agreements must have been in effect prior to February 15, 2020

    • Rent payments made to a real estate holding company that you own are NOT Eligible.

What is considered a Utility?

  • Eligible utility payments are defined as electricity, gas, water, transportation, telephone or internet.

  • Pharmacy systems are not considered a utility.

Can I pay rent early?

Many people are asking can I pay a third rent early to ensure use of the dollars?  It is our present understanding you cannot.

Can I pay payroll early?
Many are asking can I pay my last payroll of the 8 week period early to ensure I use the dollars.  It is our understanding that dollars must be paid as has been done in the ordinary course of business and as such this cannot be done.

To what extent can bonuses be forgiven, or salary if it exceeds the amount included in the 12-month period used to calculate loan amount?

  • What we know: Salary is a forgivable expense.

  • What’s unclear: Can bonuses paid during the eight-week period be forgiven? What if the bonus causes the employee’s annualized salary to exceed the 12-month salary that was used to determine the loan amount (excess salary)? Is back pay or forward pay included in the forgiveness amount?

  • Insights: It is unlikely that forgiveness was intended to cover excess salary or forward pay, unless perhaps forward pay is the norm for the employer and it becomes due during the eight-week period.

What if my loan is not completely Forgiven?

The unforgiven amount will have an 18 month term at an interest rate of 1%.  This will operate just like a traditional loan with monthly payments to your bank.  These payments will not begin for 6 months but will accrue interest during this period.

How do I calculate Forgiveness?

Forgivable Portion (FP) = Payroll costs (PC) + any applicable mortgage interest payments (MIP) + any covered utility payment (UP) or FP=PC+MIP+UP

What Documentation Will you need to provide to be approved for forgiveness?

  • Proof of Payroll

  • Proof of utility payments

  • Proof of Mortgage interest payments or rent payments

  • Proof that you have maintained wages and staff.

  • Each lender may have other documentation requirements.

  • The lenders have 60 days to verify and process the loan forgiveness and ultimately the SBA will determine the amount forgiven.

What can I do now?

We do suggest you open a separate bank account and transfer the funds to this account.  When you have to make one of the approved payments transfer the exact amount to your regular operating account and pay the bill.



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