Paycheck Protection Program (PPP): Preparing for Loan Forgiveness
The following important information was sent as a letter to business customers that Northway Bank is assisting with their PPP Loans.
We strongly recommend that you read the information below in it's entirety before you submit your loan forgiveness application.
Thank you for choosing Northway Bank to process and service your Paycheck Protection Program loan. We are proud to be able to assist you and our community during this difficult time. Northway Bank is committed to managing your application for loan forgiveness as efficiently as possible. To further demonstrate that commitment, the Bank has created a team of dedicated banking professionals to assist you with this process.
Obtaining the loan is just the first step - while some outstanding questions remain when it comes to the loan forgiveness process, Congress recently clarified some of these in the Paycheck Protection Program Flexibility Act which passed on June 5, 2020. Below we’ve included some new changes based on the PPP Flexibility Act and how you should submit your loan forgiveness application to Northway Bank.
IMPORTANT NOTE: Section 3(c) of the Flexibility Act provides that if a borrower does not apply for forgiveness of a loan within 10 months after the last day of the Covered Period, the PPP loan is no longer deferred, and the borrower must begin paying principal and interest.
What is my loan forgiveness period?
If your loan was made on or after June 5, 2020:
Your loan forgiveness period is the 24-week (168-days) period beginning on the PPP Loan Disbursement Date. NOTE: The Covered Period shall not extend beyond December 31, 2020.
If your loan was made before June 5, 2020:
You may choose between an 8-week (56-days) or 24-week (168-days) loan forgiveness period, either of which will begin on the PPP Loan Disbursement Date. If you do not give us notice of your preference, your loan forgiveness period will be the 24-week (168-days) period beginning on the PPP Loan Disbursement Date. NOTE: The Covered Period shall not extend beyond December 31, 2020.
What can I use my PPP loan funds for?
Only the following uses of loan funds are eligible for forgiveness:
- Payroll - salary, wage, vacation, parental, family, medical, or sick leave, health benefits;
- Business Mortgage interest - as long as the mortgage was signed before February 15, 2020;
- Business Rent - as long as the agreement was in effect before February 15, 2020; and
- Business Utilities - as long as service began before February 15, 2020.
For full loan forgiveness, at least 60% of loan proceeds must be used for payroll costs. This means that no more than 40% of loan proceeds may be used for the other three purposes - business mortgage interest, business rent, and business utilities.
While we have created a dedicated team to process your forgiveness application, it is the responsibility of the borrower to utilize guidance from the SBA through SBA's various resources to ensure that the application is completed correctly before submitting the completed application to the bank. These resources should also be your first step in answering any questions you may have when completing your application. A successful forgiveness application is going to require good recordkeeping and bookkeeping in order to maximize your loan forgiveness amount. Keep diligent track of all eligible expenses and their accompanying documentation for your covered forgiveness period. We recommend that you contact your tax advisor, legal counsel, and/or bookkeeping service to assist your business if necessary.
There are three application options available to apply for forgiveness -
Option (1): SBA Form 3508EZ (revised 1/19/21) – For most Forgiveness Applications greater than $150,000.
- Instructions and application found here: https://www.sba.gov/document/sba-form-3508ez-paycheck-protection-program-ez-loan-forgiveness-application
Option (2): SBA Form 3508S (revised 1/19/21) – For most Forgiveness Applications of $150,000 or less.
- Instructions and application found here: https://www.sba.gov/document/sba-form-3508s-ppp-loan-forgiveness-form-3508s
Option (3): SBA Form 3508 (revised 1/19/21) – Closely review to ascertain if you are required to utilize this form in lieu of these outlined above.
- Instructions and application found here: https://www.sba.gov/document/sba-form-3508-paycheck-protection-program-loan-forgiveness-application
For additional information in regards to the Paycheck Protection Program visit: https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses.
Forgiveness Application Processing
Northway Bank recognizes that the PPP Forgiveness Application process can be challenging for many businesses. Therefore, Northway Bank has dedicated a centralized team of bank officers and employees specifically trained to assist you with any questions that you may have regarding this process. Please send your questions directly to the Forgiveness Team at firstname.lastname@example.org. We are expecting a very high volume of email inquiries, so it is very important to indicate the name of the original PPP Loan Borrower in the subject line of your email so that we can quickly reference your file. More information as to how to submit your completed application utilizing a secured delivery method is listed below.
Providing an accurate calculation of the loan forgiveness amount is the responsibility of the borrower, and Northway Bank will rely on borrower representations. The bank will perform a good-faith review, in a reasonable amount of time, of your calculations and supporting documents concerning amounts eligible for forgiveness. If the Bank identifies errors in calculations provided or a material lack of substantiation in the supporting documents, we will work with you to remedy the issue. IMPORTANT NOTE: The borrower’s application will not be submitted to the SBA unless all required documents outlined within the application, or requested by the bank, have been received for review. Be sure to review the attached “Forgiveness Application Tip Sheet” for guidance when completing your application. It is extremely important that the application is completed correctly so that it can be processed quickly and efficiently.
- Complete the appropriate application for loan forgiveness (SBA Form 3508, 3508EZ OR 3508S) - See application form for step-by-step instructions when completing the form.
- Submit the completed application and all required documentation to the dedicated PPP Loan Forgiveness Team using our secure delivery link at https://northwaybank.deliveredsecure.com/dropoff/248383. Make sure that your files include the name of the Borrower as listed on your loan documentation for your original PPP loan so that we are able to quickly reference your information. NOTE: Documentation required at the time of submission is outlined within each SBA application. The Bank reserves the right to request additional documentation if required. If you are unable to submit your request utilizing the above method, you can mail your completed forgiveness application to the following address:
Attn: PPP Loan Forgiveness Team
400 South Main St.
Laconia, NH 03246
- The PPP Loan Forgiveness Team will conduct a good faith review of your application to ensure that all required information has been completed. A team member may reach out to you for additional information if needed. Note: The Bank has 60 days (after receipt of a completed application package) to finish a review and submit the application to the SBA.
- The Bank will then submit the application to the SBA for review and final approval. The SBA has up to 90 days to notify the Bank of the total forgiveness amount. NOTE: Approval of the total forgiveness amount applied to your loan is at the sole discretion of the SBA.
- The Bank will then notify you of the total forgiveness amount approved by the SBA. The Bank will also notify you of the date on which your first loan payment is due, if applicable.
- If a PPP loan is not forgiven, the Bank will notify you and make the appropriate arrangements for repayment.
If your application is denied in full, the Bank will notify you in writing that a decision has been issued by the SBA denying the application. SBA reserves the right to review the decision in its sole discretion. Within 30 days of the aforementioned written notice, the borrower may notify the Bank that it is requesting that SBA review the decision. Within 5 days of receipt of the borrower’s request for review, Northway Bank must notify SBA of the request. SBA will notify Northway Bank if SBA declines a request for review. If SBA accepts a borrower’s request for review, SBA will notify the borrower and the Bank of the results of the review.
SBA may review any PPP loan of any size at any time at its discretion. If SBA undertakes such a review, SBA will notify Northway Bank, who will then notify the borrower in writing within five business days of notification. At this time, the Bank will also request that the borrower provide the applicable documentation that the instructions to the Loan Forgiveness Application Form instruct the borrower to maintain but not submit. Northway Bank will submit these documents and all other relevant documentation to the SBA within 5 business days of receipt from the borrower. If loan documentation submitted to SBA by the bank or any other information indicates that the borrower may be ineligible for a PPP loan or may be ineligible to receive the loan amount or loan forgiveness amount claimed by the borrower, SBA will require Northway Bank to contact the borrower in writing to request additional information. SBA may also request additional information directly from the borrower. SBA will consider all information provided by the borrower in response to such an inquiry. Failure to respond to SBA’s inquiry may result in a determination that the borrower was ineligible for a PPP loan or ineligible to receive the loan amount or loan forgiveness amount claimed by the borrower. NOTE: You must retain all other PPP documentation in your files for six (6) years after the date the loan is forgiven or repaid in full and allow authorized representatives of SBA or the Office of Inspector General to access these files upon request.
Any outstanding balance on your PPP loan which is not forgiven will continue to accrue interest at 1% for the remainder of the loan term. There is no prepayment penalty and you can pay off the outstanding balance at any time without incurring any additional fees. Please refer to your PPP Loan Note for additional terms and conditions. For additional details on these items, please refer to the U.S. Department of the Treasury’s “CARES Act Assistance for Small Businesses” webpage here: https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses and U.S. Small Business Administration’s “Paycheck Protection Program” webpage here: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program.
If further guidance is received from Treasury and/or U.S. Small Business Administration, you will be notified by a Team member. Northway Bank is here to assist you with your PPP loan should you have any other questions.
Forgiveness Application Tip Sheet
The information below is presented as helpful tips to assist you with completing Page 1 of your PPP Form 3508 or 3508EZ. Accurate completion of this Form is the responsibility of the borrower, and no Forgiveness requests will be submitted to the SBA without a complete application.
Business Legal Name (“Borrower”): This information can be found within the Business Loan Agreement and the Borrower’s Certification, both of which were signed prior to closing.
Business Address: This can be found below the borrower name on the Business Loan Agreement and the Borrower’s Certification, both of which were signed prior to closing.
SBA PPP Loan Number: This number can be found on Page 1 of the SBA Promissory Note and Page 2 of the SBA Form 1050, Settlement Sheet, both of which were signed prior to closing.
Lender PPP Loan Number: This number can be found near the top of the Business Loan Agreement, which was signed at your loan closing.
PPP Loan Disbursement Date: This figure should reflect the date the funds were deposited into your Northway Bank account, or the date on the check containing PPP Loan Funds that was distributed via Northway Bank.
EIDL Advance Amount: If you received an Economic Injury Disaster Loan “Advance”, enter the entire amount. Please note that although this advance will be deducted from your final Forgiveness Amount by the SBA, no corresponding adjustments should be made by you while completing Line 11 of this application.
Covered Period: The Covered Period is either (a) A 24-week (168-day) period which must begin on the PPP Loan Disbursement Date, or (b) In the event that you received your PPP loan prior to 06/05/2020, an 8-week (56-day) Covered Period. NOTE: In no event may the Covered Period extend beyond December 31, 2020.
Remember: If your loan was made before June 5, 2020: You may choose between an 8-week (56-days) or 24-week (168-days) loan forgiveness period, either of which will begin on the PPP Loan Disbursement Date. If you do not give us notice of your preference, your loan forgiveness period will be the 24-week (168-days) period beginning on the PPP Loan Disbursement Date. NOTE: The Covered Period shall not extend beyond December 31, 2020.
VERY IMPORTANT! Covered Period Examples:
- (168-day example) ABC Tank Cleaning Inc. received funds from its Northway Bank PPP Loan on 06/10/2020. The respective Covered Period would be 06/10/2020 to 11/25/2020.
- (56-day example) XYZ Lanterns LLC received funds from its Northway Bank PPP Loan on 05/26/2020 and has elected to use an 8-week Covered Period. The respective Covered Period would be 05/26/2020 to 07/21/2020.
NOTE: Guidance released from the SBA has indicated that the Covered Period must follow the format listed above. It should also be noted that the supporting documentation verifying payroll & non-payroll costs should not include the last day of the Covered Period listed on the application.
Alternative Payroll Covered Period (if applicable): For administrative convenience, borrowers that have a biweekly (or more frequent) payroll schedule have the option of selecting one of the following two options to calculate eligible payroll costs (a) A 24-week (168-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date, or (b) In the event that you received your PPP loan prior to 06/05/2020, an 8-week (56-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date.
Alternative Payroll Covered Period Examples:
- ABC Tank Cleaning Inc. received funds from its Northway Bank PPP Loan on 07/03/2020 and has a weekly payroll schedule which begins every Monday and ends on the following Sunday. The respective Alternative Payroll Covered Period would be 07/06/2020 to 12/21/2020.
- XYZ Lanterns LLC received funds from its Northway Bank PPP Loan on 04/30/2020 and has a weekly payroll schedule which begins every Sunday and ends on the following Saturday. The borrower has also elected to use an 8-week Alternative Payroll Covered Period. The respective Alternative Payroll Covered Period would be 05/03/2020 to 06/28/2020.
- NOTE: Guidance released from the SBA has indicated that the Covered Period must follow the format outlined above. It should also be noted that the payroll documentation verifying the eligible cash compensation and non-cash benefit payments should not include the last day of the Covered Period listed on the application.