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07.16.2020 - PPP Loan Forgiveness Portal Update

As business owners throughout the United States continue to feel the impact of COVID-19, we know that the Paycheck Protection Program (PPP) Loan forgiveness application is of critical importance to your plans for business continuity.  We continue to work with our third-party provider to develop an online application portal to make the PPP Loan forgiveness application process as efficient as possible.  The portal is being updated to accommodate recent program changes and the EZ application that Congress released.  We are looking forward to a launch in early August, barring any additional changes.

However, we are also awaiting guidance and technology developments from the Small Business Association (SBA).  They have yet to issue instructions on next steps for banks once we have completed our review of the forgiveness applications. We will not be able to open our vendor portal until the SBA establishes a platform (possibly similar to the ETRAN portal used for the original PPP applications), or provides us with an alternative option to move your forgiveness application along through the SBA’s review and approval process.

WHAT CAN YOU DO NOW?

  • Decide if you intend to use the PPP funds beyond the original eight-week timeframe, up to 24 weeks.
  • Determine if you qualify for the EZ Application or if you will need to complete the full PPP Loan Forgiveness Application.
  • Make sure you have all the documentation necessary to submit a complete application.

In addition, we encourage you to consult with your financial advisor or accountant when performing the financial calculations for the PPP Loan Forgiveness Application.

WHAT CAN YOU EXPECT WHEN WE START ACCEPTING APPLICATIONS?

  • You will receive an email from us that will provide a link to the FNBC online application portal that you utilized to originate your PPP loan, along with additional instructions. 
  • While FNBC Bank & Trust is retaining oversight and control over your forgiveness application, please be aware that you may also be contacted at different points in the process by our third party vendor as they assist us to efficiently manage the anticipated volume of forgiveness applications and supporting documentation.

We will continue to inform you of further developments, so please monitor your email inbox and our PPP Updates website page regularly.  If you have any questions or need additional assistance with this or any financial matter, please contact your Relationship Manager or Loan Officer.

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06.18.2020 - Revised PPP Loan Forgiveness Application & New EZ Version

On June 16, 2020, the Small Business Association released two new PPP Loan Forgiveness applications: a revised full-loan application and a new EZ Version.  The new EZ version 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 or hours of their employees; OR
  • Experienced reductions 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%.

The EZ application requires fewer calculations and less documentation for eligible borrowers. Details regarding the applicability of these provisions are available in the instructions to the new EZ application form.


While many of our clients may be eligible to start applying for PPP Loan forgiveness, FNBC Bank & Trust is not accepting PPP Loan Forgiveness applications at this time. Our third-party application processing provider will have to update their platform to accommodate these latest form changes.  We will contact you when we are able to accept your application. 

Please monitor your email inbox and our website for future updates.  FNBC Bank & Trust will continue to inform you of further developments with your PPP loan and the loan forgiveness process. In the meantime, if you have any questions or need additional assistance with this or any financial matter, please contact your Relationship Manager or Loan Officer.

*** EMAILING INFORMATION*** Please do not email any confidential information to us. To protect your privacy and financial information, please contact your FNBC Bank and Trust Loan Officer for details on sending a secure email should you need to contact us via email.

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06.05.2020 - PPP Loan Forgiveness Bill Update

On the evening of Wednesday, June 3, 2020, the U.S. Senate passed the U.S. House of Representatives bill that creates more flexibility for borrowers using Paycheck Protection Program (PPP) funds.  The bill addresses five key points:

  • PPP borrowers have the option to extend the eight-week window to 24 weeks.
  • The bill extends the deadline to rehire workers to Dec. 31.
  • The bill reduces the amount that must specifically be used on payroll from 75 to 60 percent (though now this 60 percent is a cliff rather than a tapering-off point).
  • The bill gives borrowers five years instead of two to pay back unforgiven debt, and allows businesses to defer payroll tax. The interest rate remains at 1%.
  • The bill allows certain exemptions to the employee-retention requirement. PPP borrowers would not be penalized if they could, in good faith, document an inability to rehire individuals who had been let go or hire new qualified employees, or document an inability to return to the same level of business activity as before due to compliance with the requirements established by health authorities.

We await further guidance on how the Small Business Association interprets these changes and how they will specifically impact forgiveness measurements and requirements. We encourage you to continue consulting with your accounting and legal counsel as you prepare to apply for PPP loan forgiveness.

Please check your email inbox and our website for the updates and additional information.

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05.19.2020 - PPP Loan Forgiveness Application & Guidance 

On Friday, May 15, the Small Business Administration (SBA) released the Paycheck Protection Program (PPP) Loan Forgiveness Application, along with detailed instructions for its completion.  We are providing a link to the application for your convenience.  We hope this will help you begin the process of gathering the required information, and documenting and calculating payroll costs and qualified business expenses.

We expect the SBA to provide additional guidance soon to further assist you with completing the application.  FNBC Bank & Trust will use an automated platform to process our customers' applications as efficiently and quickly as possible.  Please monitor your inbox and our website for future updates and instructions on submitting your application.

FNBC Bank & Trust will continue to inform you of further developments with your PPP loan and the loan forgiveness process.  In the meantime, if you have any questions or need additional assistance with this or any financial matter, please contact your Relationship Manager or Loan Officer.

 

*** EMAILING INFORMATION*** Please do not email any confidential information to us. To protect your privacy and financial information, please contact your FNBC Bank and Trust Loan Officer for details on sending a secure email should you need to contact us via email.

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05.07.2020 - PPP Loan Application & Guidance

If you have received a PPP Loan through FNBC Bank & Trust, you probably have a lot of questions. We are providing the following summary and guidance as a starting point for you to prepare your documentation in anticipation of applying for PPP loan forgiveness. Additional Small Business Association (SBA) guidance on loan forgiveness is expected but has not been published as of the date of this summary (5/7/2020), so this summary is based on the rules currently available. Guidance on the program is subject to change, without notice. 

We will do the best we can to update you on final guidance when issued, including the final form of application for forgiveness.  However, we strongly recommend that you consult with your legal counsel and accounting professionals as you navigate this process.

Use of PPP loan proceeds are only for the following items:

  • Payroll consisting of salary, wages, vacation pay, family, medical or sick leave, health benefits, retirement benefits, and state or local payroll taxes, but not compensation to individual employees in excess of $100,000 annually, not including the value of non-cash benefits, and payments to independent contractors or employers share of federal payroll taxes
  • Interest payments on a mortgage that was in place prior to February 15, 2020
  • Rent as long as the lease was in place prior to February 15, 2020
  • Utilities as long as service began prior to February 15, 2020

The expenditures that will count towards forgiveness calculations will only be those “incurred and paid” during the 8-week period commencing on the date you received your loan proceeds.  We expect further clarification from the SBA on the meaning of “incurred and paid” costs, as it pertains to when accrued expenses are paid. 

We suggest that you consider placing the loan proceeds into a segregated account to better track expenditures and consider use of a fairly simple spreadsheet to track your expenditures by category.

No less than 75% of the loan proceeds that may be forgiven must be used for payroll costs.  Additionally, there are other requirements as to forgiveness calculations dealing with staffing and pay requirements that may reduce that percentage.

As to staffing, reductions in the number of employees on the payroll will reduce the amount of payroll expenses that count towards forgiveness.  You must determine the average number of full-time equivalent (FTE) employees for the following periods:

  • A: The 8-week period commencing on the date you received your loan proceeds
  • B: The period commencing 2/15/19 and ending 6/30/19
  • C: The period commencing 1/1/20 and ending 2/29/20

Divide A by B and divide B by C. Which is greater, A/B or B/C?

If the greater of the two results exceeds 1.0, you have cleared this hurdle and there will be no reduction in Payroll Costs that count towards forgiveness for failure to meet the minimum staffing requirement.  However, if the greater of the two results is less than 1.0, your forgivable Payroll Costs will be reduced accordingly unless you eliminate the reductions in FTE employees on or before June 30, 2020.

If you have not calculated and documented the number of FTE employees for the periods commencing 2/15/19 and ending 6/30/19, and commencing 1/1/20 and 2/29/20, it would be a very good idea to do so now.  You will need to submit payroll records to support all FTE calculations, including payroll tax filings reported to the IRS, and state income, payroll and unemployment insurance filings.  Unfortunately, the definition of FTE employees is not currently very precise, so additional guidance may shed more clarity on that topic as well.

 

Employees that received less than $100,000 in annualized pay in 2019 may not have their pay reduced by more than 25% during the 8-week period compared to the most recent quarter they were employed.  As such, if the employee’s pay over the 8-week period is less than 75% of their pay during the most recent quarter they were employed, the forgiveness will be reduced by the difference between their current pay and 75% of the original pay, unless you reinstate any decreases in pay that exceed 25% on or before June 30, 2020.   

Not more than 25% of the loan forgiveness amount may be attributable to eligible non-Payroll Costs (that is, Covered Mortgage Obligations, Covered Rent Obligations, and Covered Utility Payments).  Non-Payroll Expenses eligible for forgiveness inclusion should be supported by copies of leases, mortgages, and utility statements, as well as evidence of payments made during the 8-week period.  Accordingly, gathering and maintaining copies of those documents will be critical.  There are some open questions that the SBA has not yet addressed including whether rent includes items typically referred to in leases as “additional rent,” such as common area maintenance charges, insurance, taxes, etc., or what, if any, restrictions may be in place for leases with related parties.

Forgiveness calculations for self-employed individuals differ somewhat.  Self-employed individuals may use loan proceeds to replace only up to 8 weeks of 2019 net profit as reflected on their 2019 federal income tax returns.  Non-payroll expenses eligible for forgiveness must be documented as set forth above but are also subject to the requirement that said expenses were claimed or were eligible to be claimed on 2019 Form Schedule C.

If they haven’t already been filed, it would be a very good idea to file 2019 federal income tax returns before the end of the 8-week period.  In the case of self-employed individuals, federal income tax returns are considered mandatory to even start forgiveness calculations.  In the case of other business entities, it is plausible that final guidance will require federal income tax returns for some verification purpose that has not been disclosed yet. 

In order to obtain forgiveness, you will need to submit an application to us.  We will provide guidance on obtaining and completing the application as soon as it becomes available.  The application will include the calculations and documentation of the items discussed above as well as any other documentation that SBA may add in its final guidance.  Accordingly, complete and accurate recordkeeping will be crucial.  You will also be required to make certain certifications to the SBA including attesting that documentation submitted is true and correct, and that PPP loan proceeds were only used for allowable expenses.  The exact form of application is likely to be addressed further in the final guidance. 

The present guidance provides for us to make a decision within 60 days of receipt of the application for forgiveness. As with other things mentioned above, the final guidance may alter that in some way.  We are also aware that final guidance may alter our current understanding of the approval process we will be undertaking.

Amounts not forgiven will continue to be subject to the terms set forth in the loan documentation you executed previously.  Again, final guidance may alter this somewhat, though it should be reassuring to know that it would be difficult and highly unlikely that final guidance could alter any terms to your detriment.

 

If you have any questions or require additional information, please contact your Relationship Manager or Loan Officer.  We encourage you to monitor your email inbox for additional communications from FNBC Bank & Trust as we will continue to provide you with updated information as it becomes available to us.

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