Intro to PPP Loan Forgiveness + Documentation You Can Start Preparing TODAY

Note: CEF bases our PPP guidance on US Treasury Department and Small Business Administration guidelines. Federal guidance will change. When guidance changes, CEF will keep you updated. CEF’s guidance is intended to be of educational nature and is not intended to mandate or supersede the business practices or decisions of your company, its owners, or managers. Please also consider consulting with your CPA or attorney.

Purpose:
Small businesses receiving a Paycheck Protection Plan loan will seek all or most of their PPP loan to be forgiven. Eight weeks after your PPP disbursement was received, CEF PPP borrowers will apply to CEF for forgiveness through an online application/process. The process will be similar to the original application process, and our goal is to provide you as much information in advance as we can.

Loan forgiveness depends on:

1. Appropriate spending in the allowed areas (see “PPP Loan Forgiveness Overview” plus additional guidance below).
2. Documenting your spending appropriately.

Bright-line allowable expenses that qualify towards PPP forgiveness:

1. Not less than 75% of PPP proceeds spent on payroll or payroll related costs:
   1. W2 Wages or, for sole proprietors without employees, owner’s compensation replacement payments (replacement for “owner draws” in the previous year)
   2. Employment taxes related to W2 wages
   3. Company-paid group health insurance benefits
   4. Company-paid retirement benefits
   5. State unemployment insurance taxes
2. No more than 25% spent on the following eligible items:
   1. Business facility rent
   2. Business facility utilities
   3. Interest on business debt obligations incurred before February 15, 2020

Bright-line NON-allowable expenditures of PPP loan proceeds:
Note: Such expenditures violate the terms of the CARES Act and may result in fines imposed by federal authorities.

1. Payments to 1099 contractors
2. Bonuses and one-time payments outside of normal business practices.
3. More than 25% of total PPP loan proceeds spent on non-payroll related expenses in 2) a, b, or c above.
4. Auto lease payments.
5. For sole proprietors, owner compensation replacement not consistent with compensation received in 2019.

In short, expenditures of PPP loan proceeds in any other areas than those shown in 1) and 2) under “Bright-line allowable expenses that qualify towards PPP forgiveness” are prohibited.

Employee Full Time Equivalent (FTE) Retention Requirement: 

By no later than June 30, 2020, employee FTE count must be at pre-Covid levels.

1. Employees do not have to be the same employees as pre-Covid.
2. Must be W-2 employees documented by a payroll register.

Documentation Planning for Best-Chance PPP Loan Forgiveness

Your documentation planning path depends on your business type and how you file your federal taxes. Find your path on the following page. You should begin documenting now. Soon, CEF will provide special attestation forms to assist you. You will use these forms in your PPP loan forgiveness online procedure beginning in about eight weeks.

Note: Each “attestation form” mentioned below will show facts about how you make PPP-allowed payments. An attestation form is true to the best of your knowledge. You will use such forms in your application to CEF for PPP loan forgiveness. All attestation forms will be provided by CEF soon.

Documentation Planning for PPP Loan Forgiveness

While all attestation forms will be provided to you by CEF soon, you should begin record keeping now.