Paycheck Protection Program (PPP) Loan Forgiveness Application

 

Bank of Hope will temporarily stop accepting PPP forgiveness applications until further guidance from the U.S. Small Business Administration (SBA) and the U.S. Treasury Department. You may continue to fill out the forgiveness application and the workbook by clicking here; however, you will not be able to submit to Bank of Hope for review at this time.

We are closely monitoring proposals for legislation changes and we look forward to assisting you on your forgiveness applications once necessary clarifications are addressed by the agencies.

For step by step instructions on the entire PPP Loan Forgiveness application process, click here.
Language (KO): PPP 탕감 신청 프로세스에 대한 안내를 원하시면 여기를 클릭해 주십시오. 


 

Information on SBA Paycheck Protection Program (PPP) Loan Forgiveness

Note: This information is based on the SBA’s PPP Loan Forgiveness Application released on May 15, 2020, and the Paycheck Protection Program Flexibility Act of 2020. This is for informational purposes only and is subject to further legislative amendments and guidance. Please consult with your tax, accounting and/or legal advisors.

 

The funds from the PPP can be used for the following purposes (including, but not limited to):

  • Payroll — Compensation in the form of salary, wages and commissions; payment for vacation, parental, family, medical, or sick leave; payment for provisions of employee benefits consisting of group health care coverage
  • Mortgage interest — Payment of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property incurred before February 15, 2020
  • Rent — Business rent or lease payments pursuant to lease agreement for real or personal property in force before February 15, 2020
  • Utilities — Business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020

All expenses that fall under those categories are eligible for forgiveness.

The following conditions will apply:

  1. Covered Period
  2. The 60/40 Rule
  3. Staffing Requirements
  4. Pay Requirements
  5. Rehiring Grace Period
 

1. Covered Period

Eligible expenses are those that are incurred over 8 or 24 weeks, starting from the day the first loan disbursement was made by the bank.

Borrowers with a biweekly payroll (or more frequent) can elect to calculate payroll expenses using an alternative payroll covered period beginning on the first day of your first pay period following your PPP loan disbursement date.

 

2. The 60/40 Rule

At least 60% of PPP loan must be used for payroll costs. If you use less than 60 percent of the loan amount for payroll costs during the Covered Period, you will be eligible for partial loan forgiveness.

 

3. Staffing Requirements

You must maintain a certain baseline number of full-time equivalency (FTE) during the Covered Period. To calculate this baseline FTE, apply the reference period of your choice of either (a) or (b) or (c) below:

  1. The average number of FTE of the borrower between 01/01/20 and 02/29/20
  2. The average number of FTE of the borrower between 02/15/19 and 06/30/19
  3. In case of seasonal employers, either (a) or (b) or a consecutive twelve-week period between May 1, 2019 and September 15, 2019

In determining the FTE before COVID-19 and during the Covered Period (8-week or 24-week), the SBA has given two alternative methods of calculation. Small business who retain or bring back all of employees during the covered period or by December 31, 2020 will not have the forgiveness amount reduced.

Option 1

The first option is to take the average number of hours paid each week for each employee, divide by 40 and round the total to the nearest 10th. The maximum number of hours per employee is 40 or 1 FTE.

Example:

Employee A
Average Weekly Hours: 40
40 hours divided by 40 = 1 (1 FTE)

Employee B
Average Weekly Hours: 35
35 hours divided by 40 = 0.875 (0.9 FTE)

Employee C
Average Weekly Hours: 30
30 hours divided by 40 = 0.75 (0.8 FTE)

Employee D
Average Weekly Hours: 25
25 hours divided by 40 = 0.625 (0.6 FTE)


TOTAL FTE = 3.3 FTE

Option 2

The second option is to assign a 1.0 FTE for employees who work 40 hours or more per week and 0.5 FTE for employees who work fewer hours at the election of the borrower.

Example:

Employee A
Average Weekly Hours: 40
(1 FTE)

Employee B
Average Weekly Hours: 35
 (0.5 FTE)

Employee C
Average Weekly Hours: 30
(0.5 FTE)

Employee D
Average Weekly Hours: 25
(0.5 FTE)

 

TOTAL FTE = 2.5 FTE

FTE Reduction Safe Harbor

A safe harbor under applicable law and regulation exempts certain borrowers from the loan forgiveness reduction based on FTE employee levels. The borrower is exempt from the reduction in loan forgiveness based on FTE employees described above if both of the following conditions are met:

  1. The borrower reduced its FTE employee levels in the period beginning February 15, 2020, and ending April 26, 2020
  2. The borrower then restored its FTE employee levels by not later than December 31, 2020 to its FTE employee levels in the borrower’s pay period that included February 15, 2020.

FTE Reduction Exceptions

During the period between February 15, 2020 and December 31, 2020, the amount of the loan forgiveness will not be proportionately reduced if you are able to document:

  1. An inability to rehire individuals who were employees on February 15, 2020; and
  2. An inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020 or
  3. An inability to return to the same level of business activity prior to February 15, 2020, due to compliance with requirements established by Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during March 1, 2020 and December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19. Any FTE reduction with proper documentation does not reduce your loan forgiveness
 

4. Pay Requirements

You must maintain at least 75% of total salary for each employee. If an employee’s pay over the Covered Period is less than 75% of the pay that they received between January 1, 2020 and March 31, 2020, the eligible amount for forgiveness will be reduced.

 

5. Rehiring Grace Period

You can rehire any staff that were laid off or put on furlough and reinstate any pay that was decreased by more than 25% to meet the requirements for forgiveness. You have until the date of the forgiveness application, not later than December 31, 2020 to restore your full-time employment and salary levels for any change made between February 15, 2020 and April 26, 2020.


Required Documents for Forgiveness

Examples of documents you can provide to verify the number of full-time equivalent employees on payroll and their pay rates, for the applicable period used to prove that you met the staffing and pay requirements are:

  • Payroll reports from the payroll provider
  • Payroll tax filings (Form 941 and/or State Unemployment Insurance Tax Forms, if applicable)
  • Documents verifying any retirement and health insurance contributions
  • Documents verifying eligible interest, rent, and utility payments (cancelled checks, payment receipts, account statements)

Good recordkeeping will be critical for getting the PPP loan forgiven. You need to keep track of eligible expenses and their accompanying documentation over the 8 weeks or 24 weeks.

What happens if the SBA will not approve the forgiveness?

You must retain all documentation in file for six years after the date of the loan is forgiven or repaid in full, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request.

Applying for loan forgiveness

Bank of Hope cannot guarantee forgiveness of your PPP loan. Loan forgiveness is not automatic but must be requested by you by completing SBA’s PPP Loan Forgiveness Application. You can submit the completed PPP Loan Forgiveness Application to us. It is your sole responsibility to determine and certify as to your eligibility for loan forgiveness and compliance with the PPP regulations.

The PPP Loan Forgiveness Application requires you to provide documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, rent, and utility obligations. In addition, you are required to maintain certain types of documents used to support the information provided in the PPP Loan Forgiveness Application and all records relating to the PPP loan. 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.

Additional Information

Additional Information can be obtained at: