Important Information about your SBA Paycheck Protection Program (PPP) Loan

PPP borrowers may be eligible for loan forgiveness. Renaissance Economic Development Corporation wants to help you understand the process. Information is also available in Chinese, Korean, and Spanish.

Do I need to apply for loan forgiveness?

SBA PPP loan forgiveness is NOT automatic. Business owners who received SBA PPP loans through Renaissance Economic Development Corporation must submit a request to the organization for loan forgiveness. Renaissance will then submit your request to SBA for approval. You will need to show evidence of how you spent your loan. Therefore, make sure to save all documents for eligible expenses. Retain all documentation related to these expenses in case of an audit.

What documentation is needed to be eligible for loan forgiveness?

Documentation to support potential loan forgiveness will include but will not be limited to the following:

  • Payroll record and 941 Quarterly Tax Returns up to the date forgiveness is requested.
  • Monthly billing statements from February 2020 up to the date forgiveness is requested for any business debt including owner-occupied commercial real estate debt. Home mortgages or any personal debt are not eligible.
  • Copy of lease agreement dated prior to February 15, 2020 to evidence business rent  obligations.
  • Monthly utility bills (electric, gas, telephone, water, internet, etc.) under the business from February 2020 up to the date forgiveness is requested. Utilities for personal use are not eligible.
  • Bank Statements from when the funds were received up to the date of forgiveness is requested.

What expenses are covered by loan forgiveness?

PPP loans are meant to help small business owners keep employees on payroll. The PPP Loan may be forgiven if all employees are kept on the payroll and the money is used to cover the following expenses:

  • Payroll costs, including benefits
  • Interest on mortgage obligations
  • Rent under lease agreements
  • Utility costs

To be covered, these expenses must be incurred within eight (8) weeks from the loan disbursement date. For example: If you received your loan on May 1, 2020, the eligible expenses must have been incurred from May 1, 2020 through June 26, 2020 for the loan to be forgiven. Please see Question 4 on how much of the loan can be forgiven.

For mortgage interest or rent costs to qualify, you must demonstrate that agreements were in place prior to February 15, 2020. For utility costs to qualify, you must demonstrate that service was in place prior to February 15, 2020.

How much of a loan is eligible for forgiveness?

The amount of loan forgiveness will depend on your payroll costs for an eight-week period beginning from the date the loan is first disbursed. At least 75% of the forgiven amount must have been used for payroll costs. That means mortgage interest, rent, and utilities expenses together cannot account for more than 25% of the amount of loan forgiveness.

For example: If you received a loan in the amount of $50,000 on May 1, 2020, at least $37,500 must be used to cover payroll expenses incurred between May 1, 2020 and June 26, 2020 for you to qualify for forgiveness of the full $50,000. The remaining $12,500 may be forgiven if spent on a combination of eligible mortgage interest, rent, and utility costs during that same time period.

The amount of loan forgiveness will be reduced if:

  • You decrease the number of full-time employees (for example, you had 5 full-time employees but furloughed or laid off all or some of them due to the pandemic).
  • You decrease salaries and/or wages by more than 25% for any employee who made less than $100,000 in 2019 (for example, prior to the pandemic, you were paying an employee $30,000 per year or $2,500 per month but had to reduce their salary to less than $1,875 per month due to the pandemic).

To avoid a reduction, you will have until June 30, 2020 to rehire any employees you have furloughed or laid off as a result of the pandemic and/or restore salaries or wages reduced by more than 25%. If an employee that was furloughed or laid off refuses an offer to be rehired, loan forgiveness will not be affected as long as you have documentation of the rejected offer. If you pay yourself a salary or wages, that amount must be limited to eight weeks’ worth of the amount you made in 2019. You will have to show proof of your earnings from 2019.

What happens after the forgiveness period ends?

After the loan forgiveness period for your PPP loan ends, if the whole loan has not been forgiven, the new principal amount is calculated as the original amount minus the amount of forgiveness. There is a 6-month payment deferral period that begins on the loan disbursement date.

After the deferral period, the new principal amount plus interest at 1% per annum must be repaid within 18 months. There are no penalties or fees for early repayment if you pay your loan sooner.

What do I do next?

In eight weeks from the date you received your PPP loan, email Loanservicing@renaissance-ny.org to request loan forgiveness and submit the necessary documentation. Our Post Closing Counselors will support you through the process. All Renaissance Staff are currently working remotely for the safety of Renaissance staff and clients, so you do not need to worry about coming to an office location.

Where can I find more information?

Renaissance will continue to keep you updated on important information related to your PPP loan as it becomes available.

More information can be found online in English at https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program#section-header-5.

For other languages, please visit https://www.sba.gov/page/coronavirus-recovery-information-other-languages.

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