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Paycheck Protection Program (PPP) Loan Forgiveness

May 20, 2020 

For those of you who are new customers of Itasca Bank & Trust Co., welcome. As a community bank, we work closely with our customers and we are happy we’ve been able to help you obtain the much-needed PPP loan.

 Now that you’ve received the funding from your Paycheck Protection Program (PPP) loan, you likely have some questions and may be wondering what happens next.  Your business may have received funding during the first round of the program and you are half-way through the eight -week period following the loan funding, or your loan may have funded within the last couple of weeks.   We know this has been a very hectic time and we wanted to communicate with you now to help you organize and prepare your documentation that you will need to submit to us to have your loan forgiven after your 8-week period concludes. 

A major benefit of the PPP is that it offers forgiveness up to the full principal balance and accrued interest for loan proceeds used for covered purposes, as long as employee headcount and compensation levels were also maintained during the covered period. 

The Small Business Association (SBA) and the U.S. Treasury released a detailed PPP Loan Forgiveness Application on Friday, May 15, 2020. The application offers step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness. It also provides a list of records that need to be maintained by the borrower.   The agencies have indicated that further guidance will be released soon. The most current document may be accessed here: Paycheck Protection Program (PPP) Loan Forgiveness Application 

Here are a few of the things that you should be doing to stay organized and to make the tracing of funds as clear as possible: 

  • Document, Document, Document: Work with your accountant to assist you in understanding the regulations.  The most important piece of guidance we can provide you at this time is to create a plan to track all transactions for which you used PPP funds and keep all related receipts organized. This will keep you in compliance with the guidelines. 
  •  Payroll:  Keep accurate payroll records, so you can show that at least 75% of your loan went to payroll costs. This includes all employer paid group health insurance and employer paid retirement benefits.  There is also an expectation that you maintain current employee numbers during this time. (If you are a sole proprietor, you will need to establish a payment of wages to support forgiveness by writing yourself a check). 
  • Non-Payroll Covered Expenses:  Payment of all interest on mortgage obligations incurred in the ordinary course of business, rents on leasing agreements and payments for utilities which were in force before February 15, 2020 may be included.  Utilities include electricity, gas, water, phone and internet.  Keep invoices, statements and cancelled checks to prove allowable expenses. Eligible non-payroll costs cannot exceed 25% of the total forgiveness amount.

The information above is guidance provided by the Small Business Administration as of May 15, 2020, and does not ensure loan forgiveness.  The SBA will be providing additional guidance in the near future.

After eight weeks has passed since you received your loan proceeds, you will submit all forms and supporting documentation to request forgiveness of this loan to us at Itasca Bank & Trust Co. The PPP Loan Forgiveness Application referred to above provides a detailed list of what must be submitted, including all forms and supporting documentation.

The preferred method to submit all documentation will be via e-mail. Send to [email protected]. We will review and verify it, then send it on to the SBA on your behalf. Please check this page regularly for updates. Make sure to also check the following resource for the most up-to-date information:

https://www.cbaionline.com/downloads/SBA-Form-3508-PPP-Forgiveness-Application.pdf

In the meantime, if you have any questions or concerns, please send an email to:  [email protected].

Sincerely,

John J. Hunt
Senior Vice President

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