Borrower Fact Sheet – SBA Paycheck Protection Program (PPP)

April 22, 2020

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How is the loan forgiven?

The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities.  At least 75% of the forgiven amount must have been used for payroll.  Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels.  Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

How much is forgivable?

The amount of loan forgiveness can be up to the full principal amount of the loan and any accrued interest. That is, the borrower will not be responsible for any loan payment if the borrower uses all of the loan proceeds during the 8-week period beginning the date of the origination of the loan for forgivable purposes described below – and employee and compensation levels are maintained. The actual amount of loan forgiveness will depend, in part, on the total amount of:

  • Payroll costs*
  • Payments of interest on mortgage obligations incurred before February 15, 2020.
  • Rent payments on leases dated before February 15, 2020; and
  • Utility payments (electricity, gas, water, transportation, telephone, or internet) under service agreements dated before February 15, 2020

Not more than 25 percent of the loan forgiveness amount may be attributable to non-payroll costs.

I file a Schedule C or F with my tax return for my business; what information do I need to provide for forgiveness?

If you have not already done so, you will have to provide the bank with a copy of your 2019 Schedule C or F. The amount qualifying as “payroll costs” will be based on your 2019 net profit (line 31 or line 34) plus other payroll costs* paid to your employees.

How could the forgiveness be reduced?

The amount of loan forgiveness calculated above is reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees. 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.

Prior to the end of the 8-week program, we will provide a PPP Loan Forgiveness Worksheet to assist you in calculating the actual forgiveness amount.  In the meantime keep complete records of your expenditures, categorized by payroll / employee compensation, rent or mortgage interest and utilities.

What if I bring back employees or restore wages?

Reductions in employment or wages that occur during the period beginning on February 15, 2020, and ending 30 days after enactment of the CARES Act, (as compared to February 15, 2020) shall not reduce the amount of loan forgiveness IF by June 30, 2020 the borrower eliminates the reduction in employees or reduction in wages.

How can I request loan forgiveness?

Requests must be submitted to the bank where you received your loan. Please plan to work with the same lender who assisted you with the application.  The request must 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 bank must make a decision on the forgiveness within 60 days.

 RequiredChecked ✓
1Documentation verifying the number of full-time equivalent employees on payroll and pay rates for the required periods, including payroll tax filings reported to the IRS and state income, payroll and unemployment insurance filings.
2Documentation, including cancelled checks, payment receipts, transcripts of accounts, or other documents verifying payments on covered mortgage obligations, payments on covered lease obligations, and covered utility payments.
3Documentation of all retirement plan funding by the employer for the 8 weeks following the origination of the loan should be sufficient. Copies of work-papers, schedules and remittances to the retirement plan administrator should be available.
4A certification from an authorized representative of the Borrower that the documentation presented is true and correct, and the amount for which forgiveness is requested was used to retain employees, make interest payments on a covered mortgage obligation, make payments on a covered rent obligation or make covered utility payments.
5Prepared Loan Forgiveness Worksheet:

Please use the PPP Loan Forgiveness Worksheet, which is a Microsoft Excel spreadsheet that will be provided at a future date.

Important Notes

Borrower will make a certification that the documentation is true and correct, the amount for which forgiveness is being requested was used to make payments to retain employees and to make interest payments on covered mortgage obligations, covered rent obligations, and covered utility payments.  In addition, the SBA may request further information.  There will be NO forgiveness if the documentation is not presented.  The SBA will render a decision within 60 days after receipt of an application for forgiveness.  The amount of any loan forgiveness under this program is NOT taxable income.

*Eligible Payroll Costs:

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each
  • Employee benefits including costs for vacation, parental, family, medical, or sick leave;
    allowance for separation or dismissal; payments required for the provisions of group
    health care benefits including insurance premiums; and payment of any retirement
  • State and local taxes assessed on compensation; and
  • For a sole proprietor or independent contractor: wages, commissions, income, or net
    earnings from self-employment, capped at $100,000 on an annualized basis for each

If you use PPP funds for unauthorized purposes, SBA will direct you to repay those amounts. If you knowingly use the funds for unauthorized purposes, you will be subject to additional liability such as charges for fraud.

Important Disclaimer

The National Bank of Middlebury is basing the explanations contained in this Fact Sheet on information provided to banks from The US Department of Treasury and the US Small Business Administration prior to April 16, 2020.  All information is subject to change as future rules are written.

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