Top Tips To Get Your Paycheck Protection Program Loan Forgiven

Updated September 2, 2020

New Interim Final Rule Relating to Business Owners & Non-Payroll Costs

We have been working long and hard to remain current with the ever-changing Paycheck Protection Program loan regulations, and we appreciate your patience and tolerance through this process.  

Last week, the Treasury issued a new Interim Final Rule (IFR) that we have summarized below for you. Please consult your CBC representative with any additional questions. 

Summary of New IFR

  1. Owner-employees in a C or S Corporation who have less than 5% ownership stake will not be subject to the owner-employee compensation rule in relation to caps. 

  2. The amount of loan forgiveness requested for non-payroll costs may not include any amount attributable to the business operation of a tenant or sub-tenant of the PPP borrower or, for home-based businesses, household expenses.

  3. If there exists common ownership between the operating business and the landlord, the amount of loan forgiveness requested for rent or lease payments to the landlord can be no more than the amount of mortgage interest owed on the property during the Covered Period that is attributable to the space being rented by the business. In this common ownership scenario the PPP borrower can only submit forgiveness for the amount of mortgage interest paid during the covered period and not the rent or lease payments paid to the landlord.

Click Here to Read the New IFR
(see pages 5-7 for examples)

We understand that these new regulations in the forgiveness process can be frustrating and complicated, and we ask for patience and understanding as we navigate through the continuing changes by the government. 

Thank you again for letting us support your business, 


Ash Patel, President & CEO of Commercial Bank of California

Updated August 10, 2020

Changes to PPP Loan Terms Following the Flexibility Act

On June 5, 2020, the PPP Flexibility Act of 2020 was enacted which made various changes to the terms of PPP loans, and subsequently the SBA issued rules on June 11, 2020 and July 22, 2020 to incorporate those changes.

In connection with your Loan you executed various loan documents, including (without limitation) a Promissory Note and a Payment Protection Program Loan Affidavit. In light of the Flexibility Act and the SBA Flexibility Rules, your Loan Documents are amended to the extent necessary to accomplish the changes described below. 

Payment Deferral Period

The Borrower’s Loan Documents currently provide that the Borrower is not required to make payments on the Loan for a six-month period after the date of the Loan Documents. However, the Payment Deferral Period is hereby extended and will end on the following date (as applicable):

  1. If within 10 months after the end of the Covered Period the Borrower submits to the Lender a completed loan forgiveness application in accordance with the SBA’s rules governing PPP loans (the “SBA PPP Rules”), then the end of the Payment Deferral Period will be (a) the date the SBA remits the determined loan forgiveness amount to the Lender, or (b) if no loan forgiveness is allowed then the date the SBA provides notice of that fact to the Lender; or 
  2. If within 10 months after the end of the Covered Period the Borrower does not submit to the Lender a complete loan forgiveness application in accordance with the SBA PPP Rules, then the end of the Payment Deferral Period will be 10 months after the Covered Period.  

However, notwithstanding the above, if a new law is passed, or a rule is issued by the SBA, that requires the payment deferral period for PPP loans to be changed and such requirement is applicable to the Loan, then the Payment Deferral Period for the Loan will be the period for deferring payments on PPP loans provided in such law or rule as applicable to the Loan.

Loan Payments

Payments on the Loan will begin after the Payment Deferral Period unless the principal balance and accrued interest on the Loan are entirely forgiven by the SBA.  Since the Payment Deferral Period may vary as described above, and the loan forgiveness amount approved by the SBA may vary, the Lender is unable to currently inform the Borrower when the first payment on the Loan is to be made and the amount of the payments.  However, upon the end of the Payment Deferral Period, if there are any amounts owed on the Loan at that time (including principal and any accrued interest), then the Lender will notify the Borrower (a) when the first payment on the Loan is due, and (b) the amount of the payments on the Loan which will be calculated based on the amount owed on the Loan at the end of the Payment Deferral Period and then amortizing that amount over the period starting from the end of the Payment Deferral Period until the maturity date of the Loan as specified in the Loan Documents.  

However, in no event will interest be compounded on the Loan, that is, interest will not accrue on unpaid interest.

Loan Forgiveness

For purposes of calculating the amount that may be forgiven for the Loan, the period during which the Borrower must use the proceeds of the Loan is changed from eight weeks to the Covered Period. Additionally, the amount of the loan forgiveness amount that must be used for eligible non-payroll costs (as described in the SBA PPP Rules) is changed from up to 25% to up to 40%.  

Covered Period to Use Loan Proceeds

The “Covered Period” means the period after the date of the disbursement of the proceeds of the Loan during which the Borrower is allowed to use the proceeds as provided in the SBA PPP Loan Rules for loan forgiveness purposes, which is either of the following periods if the SBA issued a loan number for the Loan prior to June 5, 2020:

  1. Eight weeks, but only if the Borrower elects to use an eight-week covered period as indicated in the Borrower’s completed loan forgiveness application submitted to Lender within 10 months after the Covered Period; or
  2. 24 weeks in all other cases.

If the SBA issued a loan number for the Loan on or after June 5, 2020, then the “Covered Period” is a 24-week period after the disbursement of the proceeds of the Loan. 

However, in no event will the Covered Period extend beyond December 31, 2020. Additionally, notwithstanding the above, if a new law is passed, or a rule is issued by the SBA, that requires the period during which borrowers may use PPP loan proceeds to be changed and such requirement is applicable to your Loan, then the Covered Period for the Loan will be the period for using loan proceeds described in such law or rule as applicable to the Loan.

The changes to the Loan Documents described above are effective as of the date of the Loan Documents, and you do not need to take any further action with regard to these changes. Please keep an watch for a letter from us in the mail with this and more information, if you haven't already received it.

Questions about your loan or the term changes?

Please contact your CBC representative who has been working with you on your PPP Loan

 

 Updated June 25, 2020

The SBA has resleased the Paycheck Protection Program Loan Forgiveness Application.

The application will be available on our client portal on Friday, June 26, 2020. If you meet the below conditions, you will be eligible to use the EZ application, that will be available on the client portal July 2, 2020. 

  • You did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the 24-week covered period (other than any reductions that arose from an inability to rehire individuals who were employees on February 15, 2020, if you are unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020, and reductions in an employee’s hours that a borrower offered to restore and were refused).
  • You were unable to operate between February 15, 2020, and the end of the 24-week covered period at the same level of business activity as before February 15, 2020 due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020, by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.

The Treasury has released a new Interim Final Rule (IFR) that provides more guidance on getting your PPP loan forgiven.

The revised IFR reflects the changes per the recent Flexibility Act signed on June 5, 2020. We have summarized the updates below:

  • You will not have to make payments on principal or interest for the loan if the forgiveness application is submitted to CBC within 10 months from the end of the covered period (now up to 24 weeks from funding date).
    • If the loan forgiveness application is NOT submitted by that date, payments on principal and interest will start.
  • The loan will be forgiven if at least 60% of funds are used for payroll costs (a reduction from 75%), and the remaining 40% used for other eligible expenses (up from 25%).
  • You now have until Dec. 31, 2020 to reinstate any reductions in full-time employees counts or in salaries / wages, without causing a reduction in forgiveness amount.
  • You can now submit the loan forgiveness application any time on or before the maturity date of the loan and the 24-week covered period, as long as you have used all of the loan proceeds. 
  • This is subject to the forgiveness reductions required by the Acts and IFRs. 

Click Here to Read the Full Interim Final Rule

Please be aware that guidance is subject to change from the Treasury and SBA. We will inform you as updated guidance is provided by the SBA.

Thank you for letting us support your business,

Ash Patel signature

Ash Patel, President & CEO of Commercial Bank of California

Updated June 5, 2020

Important update for all PPP clients! The President signed the Paycheck Protection Program Flexibility Act today to give you more flexibility on how to utilize your funds and to increase the likelihood of getting your loan forgiven. We have summarized the Act below:

  • You can now use your PPP loan to cover expenses for up to 24 weeks from your loan funding date, up from the initial 8-week cover period
  • It increased the current limitation on the use of loan funds for non-payroll expenses from 25% to 40%
  • The Safe Harbor period is extended from June 30 to December 31

Please be aware that we are still waiting for the final version from the Treasury and SBA, and there may be changes to the above parameters. We will inform you as updated guidance is provided by the SBA.

We are proud to support your business,

Ash Patel signature

Ash Patel, President & CEO of Commercial Bank of California

Updated May 28, 2020

Dear clients,

There are two new Interim Final Rules that were recently posted on the Treasury website.

  1. One pertains to additional guidance on PPP Loan Forgiveness
  2. The other adds insight on the future Loan Reviews by the SBA on PPP customer files

Please be advised that there is currently legislation being passed in Congress that will make changes to the PPP loan forgiveness guidelines, so please familiarize yourself and continue to stay tuned for more updates.

As always, it is our goal to keep you as informed as possible during these everchanging times. 

Thank you for letting us support your business,

Ash Patel signature

Ash Patel, President & CEO of Commercial Bank of California

Updated May 20, 2020

We want to keep you regularly updated as the Paycheck Protection Program (PPP) loan forgiveness guidance evolves. Today, we are pleased to share that the SBA and Treasury have released a first draft of the PPP loan forgiveness application for your review.

Please note that this version is subject to changes in the near future, so please familiarize yourself with the document as you reach the end of the 8 weeks from your loan disbursement date. We suggest you do not dedicate significant time in filling out the document until we know it is final. 

Click Here to Review the PPP Loan Forgiveness App

Thank you for letting us support your business,

Ash Patel signature

Ash Patel, President & CEO of Commercial Bank of California

 

Updated May 13, 2020

We know that receiving a Paycheck Protection Program loan may not necessarily make you whole, but we hope it helps you get through this unprecedented time so you can (hopefully) persevere on the backend of this pandemic.  

With that said, we want to remind you of some tips for using your money so you can ultimately get the funds forgiven. In the coming weeks, we will be providing you more details on the below.

Top Tips for Getting Your Paycheck Protection Program Loan Forgiven

  1. Maintain your separate bank account for PPP loan funds to help you track spending.
  2. You will need to submit a request for PPP loan forgiveness and we will give you those instructions.
  3. Maintain your full-time employee headcount. 
  4. Maintain total wages to at least 75% of pre-pandemic numbers.
  5. Be prepared to pay back any PPP loan funds not used.

Click Here to Read the Treasury's Most Recent FAQ

Other Important Paycheck Protection Program Reminders

  1. The eight-week period begins upon receipt of the funds.
  2. Payroll costs include more than wages.
  3. At least 75% of the funds must be used for payroll costs in order to get the loan forgiven.
  4. The other 25% can be used to pay utilities, rent and mortgage interest (incurred prior to Feb. 15, 2020)
  5. Forgiveness is reduced by a decrease in workforce.
  6. Forgiveness is reduced by a decrease in compensation.
  7. Accounting method is not specified.

We take pride in assisting our business community with Payment Protection Program loans. Because the Small Business Administration has not provided detailed guidance on loan forgiveness, we are only able to provide limited information on the requirements and process for loan forgiveness. 

After we receive specific guidance regarding loan forgiveness from the Small Business Administration, we may establish a forgiveness process for Payment Protection Program borrowers to follow. We urge you to work with your attorney, accountant or other licensed advisor to ensure your compliance with existing Payment Protection Program rules and regulations. A few places to check for the most recent regulatory guidance are: (i) www.treasury.gov/cares; and (ii) www.sba.gov.

Stay safe,

Ash Patel signature

Ash Patel, President & CEO of Commercial Bank of California