The Paycheck Protection Program (PPP) offers financial relief through the Small Business Administration (SBA) to businesses across the U.S. that have been impacted by COVID-19. Wilson Bank & Trust is assisting small businesses in accessing these funds. To start an application for a PPP loan, please contact a loan officer at any of our offices. Here are some additional details about the program:
Guidelines for how the funds must be used:
- Funds are to be spent on qualified costs over the 8 weeks following your loan closing.
- Payroll costs must make up at least 75% of how you spend the funds in order to be forgiven.
- This excludes the cash compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessary;
- Limit mortgage interest payments, rent payments and utilities to no more than 25% of your loan amount.
Please note that you will owe money if you do not maintain your staff and payroll.
- Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
- Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
- Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
Carefully document how all loan proceeds were spent:
- List of all employees on payroll the 8 weeks following loan with the dollar amount of payroll costs
- Evidence of mortgage interest payments, rent payments and utilities paid during the 8 weeks following the loan
- Evidence that workers were kept on payroll or rehired once the loan was received, including a calculation of the average monthly number of full-time equivalent employees
- Evidence of restoration by June 30, 2020 of pay for any individual whose pay was reduced by 25% or more
- Evidence of payroll costs, utilities, rent/lease payments and mortgage interest paid before February 15, 2020 to compare to what is paid or incurred during the 8 weeks following the loan closing to ensure it aligns. If self-employed, these expenses are allowed to the extent they are deductible on Form 1040 Schedule C.
We want to reiterate that preparing for the Forgiveness Application as soon as your loan closes will be the best way to ensure as much of your loan’s principal and interest will be forgiven. Any unforgiven balance will begin a monthly payment starting the 7th month after your note date and will be amortized over the remaining 18 months.
Frequently Asked Questions Related to Loan Forgiveness
Updated 5/6/2020. Please note additional guidance is included at the bottom.
What qualifies as “payroll costs?”
Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation.
Is there anything that is expressly excluded from the definition of payroll costs?
Yes. The Act expressly excludes the following:
- Any compensation of an employee whose principal place of residence is outside of the United States;
- The cash compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessary;
- Federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020, including the employee’s and employer’s share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees; and
- Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116–127).
Do independent contractors count as employees for purposes of PPP loan calculations?
No. Independent contractors have the ability to apply for a PPP loan on their own so they do not count for purposes of a borrower’s PPP loan calculation.
How can I request loan forgiveness?
You can submit a loan forgiveness application request to Wilson Bank & Trust. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days.
What is my interest rate?
1.00% fixed rate.
When do I need to start paying interest on my loan?
All payments are deferred for 6 months; however, interest will continue to accrue over this period. After 6 months, you are to repay the loan over 18 months in full.
Can I pay my loan earlier than 2 years?
Yes. There are no prepayment penalties or fees.
What if I don’t use the loan proceeds for purposes specified by the SBA?
You will have to repay any amounts used for unauthorized purposes.
What if I can’t provide the records to Wilson Bank & Trust that prove how the funds were used?
You will be expected to repay the loan per the terms and conditions stated in your loan agreement.
Should I open a separate business checking account exclusively for the use of PPP approved funds?
While this is certainly not a requirement, many of our customers have found peace-of-mind in opening a separate business checking account that does not include any other money in it so it will be easy to track how the money was used. This decision must be made by the borrower based on personal preference.
Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of the CARES Act and SBA’s implementing rules and guidance) be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?
No. As an exercise of the Administrator’s and the Secretary’s authority under Section 1106(d)(6) of the CARES Act to prescribe regulations granting de minimis exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation. The interim final rule will specify that, to qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.
Is it possible for a borrower to obtain an extension of the May 7, 2020 repayment date?
US Treasury FAQ #31 reminded borrowers to review carefully the required certification on the Borrower Application Form that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA guidance and regulations provide that any borrower who applied for a PPP loan prior to April 24, 2020 and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith. SBA is extending the repayment date for this safe harbor to May 14, 2020. Borrowers do not need to apply for this extension. This extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor. SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020.
PPP Loan Forgiveness Resources
Provided below are some additional resources regarding forgiveness guidelines.
Forgiveness discussion video:
Expense Tracking Worksheet*
*This is intended to assist you in keeping track of expenses and records that may be needed to determine PPP forgiveness. As of 5/15/2020, the SBA has not provided specific details on what will be necessary. This worksheet is in no way a guarantee of required information and should not be inferred as any determination of forgiveness. Use of the worksheet is voluntary and forgiveness is not dependent upon worksheet use.
To the best of our knowledge, this information was correct as of May 4, 2020. Given the rapidly developing situation, and the possibility of new guidance being issued at any time, be mindful that some of this information may change. We are working diligently to put forth the most current information as it becomes available.