These Frequently Asked Questions (FAQs) are for informational purposes only and is subject to change as further administrative guidance is released. WaFd Bank makes no representation or warranty as to whether any borrower will be eligible for forgiveness. Borrowers should contact their tax or legal advisors with specific questions about their eligibility for forgiveness.


WaFd Bank will soon be offering an online forgiveness application process and will NOT require our clients to fill out the SBA forms 3508 and 3508EZ. We are providing these links for informational purposes only.


The SBA updated its Form 3508 (PPP Loan Forgiveness Application) ”) and related instructions, as well as issued the new Form 3508EZ, an expedited forgiveness application (“Form 3508EZ”) that Borrowers may use if they meet certain requirements were updated June 17th, 2020. These updates are intended to reflect the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”) that was signed into law on June 5, 2020, amending the previous Paycheck Protection Program under the CARES Act. The below FAQs reflect updates made under the Flexibility Act and the updated forms. Please note that we anticipate additional changes and guidance to continue being issued by the Small Business Administration (SBA). This website will be added to as we receive new information.

Frequently Asked Questions

Forgiveness


Payroll / Full-Time Equivalent (FTE)


Other

Still can't find what you are looking for? Contact a branch near you or call 1-800-324-9375 or email us at info@wafd.com.

I took out a PPP loan. How much of my loan will be forgiven?

The loan amount to be forgiven will be based on your use of the loan proceeds over the “covered period” or “alternative payroll covered period” following the date of loan disbursement.
While those periods were originally only eight-weeks, the Borrower now has a 24-week period to use their loan funds. For loans made before June 5, 2020, Borrowers may elect to have their loan forgiveness covered period be the eight-week period beginning on the date their PPP loan was disbursed.

A minimum of 60% of your total loan amount should go towards payroll costs. The remaining 40% should be used towards other forgivable purposes, such as rent, utilities, or mortgage interest.

What is the deadline for a Borrower applying for loan forgiveness?

Borrowers may apply for loan forgiveness following the end of their eight-week or 24-week period. Borrowers have up to 10 months from the end of the last day of their covered period in which to apply for loan forgiveness.

When will I know how much forgiveness I qualify for?

You should receive a response within 60 days of the submission of your completed application for loan forgiveness.

Is there any chance that the eight-week period will be extended?

Yes. The loan forgiveness covered period for all PPP loans is now 24-weeks. However, for Borrowers with loans that were made prior to June 5, 2020, they may elect to have their loan forgiveness covered period remain as the eight-week period beginning on the date your PPP loan was disbursed.

What is the loan term on my PPP loan?

For loans made before June 5, 2020, the maturity is two years; however, borrowers and lenders may mutually agree to extend the maturity of such loans to five years. For loans made on or after June 5, the maturity is five years. The date the SBA assigns a loan number to the PPP loan will be the date the loan is “made.”

How do I calculate reduced Full-Time Equivalent (FTE) count on my Loan Forgiveness Application?

To calculate a reduced number of FTEs, Borrowers must:

  1. (1) [on line 11 of Sched. A] include the average FTE headcount from either:
    1. (a) February 15, 2019 through June 30, 2019; OR
    2. (b) January 1, 2020 through February 29, 2020; OR
    3. (c) [FOR SEASONAL EMPLOYERS] either (a) or (b) or a consecutive 12-week period between May 1, 2019 and September 15, 2019
  2. (2) [on line 12 of Sched. A] include the total average FTE headcount that is the sum of Box 2 and Box 5 on the Sched. A worksheet (lines 2 and 5 on the Schedule A)
  3. Divide Line 12 by Line 11 to receive the Line 13 “FTE Reduction Quotient”

May loan proceeds be used towards payroll costs paid during the eight-week period, or may they also be used for payroll costs incurred?

Borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the eight-week or 24-week Covered Period (or Alternative Payroll Covered Period) (“payroll costs”). Payroll costs are considered paid on the day that paychecks are distributed or the Borrower originates an ACH credit transaction. Payroll costs are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date. Otherwise, payroll costs must be paid during the Covered Period (or Alternative Payroll Covered Period).

Are we required to immediately bring previously laid off employees back to the payroll? What do we do about employees who refuse to come back to work due to vulnerabilities?

Nothing in the CARES Act prevents a delay in bringing employees back to work, but it may impact the amount of loan forgiveness. The Loan Forgiveness Application calculates FTEs for loan forgiveness that cannot be delayed until the business is actively working again. Additionally, not filling open positions may limit an employer’s ability to reach the minimum 60% threshold for payroll costs, which can also reduce the forgivable loan amount. There is also nothing prohibiting employers from hiring additional employees in excess of the number used in calculating loan amount in the original loan application. Employers should fill any open positions as soon as possible to avoid a reduction in loan forgiveness. Employers may also continue paying employees who are not actively working, at a minimum of 75% of their regular salary or hourly wages in order to avoid a reduction.

Do I have to bring back the total number of employees or just pay 60% of the PPP Loan towards payroll regardless of the number of employees or hours?

The Loan Forgiveness Application looks at the average total number of FTEs over the eight-week period as well as total payroll costs. However, in certain circumstances, you can get FTE credit during the eight-week period for FTEs who are not actively working, so long as those employees still received at least 75% of their regular pay. See PPP Schedule A Worksheet, Table 1 of the Loan Forgiveness Application.

Unfortunately, there are too many moving parts related to FTEs and reduction in salary or hourly rate to be able to provide a definitive answer. Remember that a minimum of 60% of loan amount must go towards payroll costs to avoid a reduction in loan forgiveness; however, reductions in forgiveness may apply for any reductions in FTE count or compensation.

I've heard there may be circumstances where a Borrower can fall under a Safe Harbor and not have loan forgiveness reduced if the number of FTEs is reduced. Can you discuss the Safe Harbor for FTE reductions?

Borrowers may qualify for the Safe Harbor from the FTE reduction in the following circumstances: If FTE headcount is lower from the period between 2/15/20-4/26/20 than it was during the Borrower's pay period including 2/15/20, the Borrower needs to restore the headcount to at least the 2/15/20 amount of FTEs by December 31, 2020.

Borrowers may also qualify for a Safe Harbor if they can document an inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued 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 during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.

Are bonuses and commissions included in payroll costs?

Yes. Payroll costs include salary, wages, commissions and similar compensation, capped at $15,385 per employee during the eight-week period or $46,154 for the 24-week period. The Loan Forgiveness Application Instructions provide: Borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the 24-week (168-day) or 8-week (56-day) Covered Period (or Alternative Payroll Covered Period) (“payroll costs”). This indicates that bonuses or commissions paid during the Covered Period or the Alterative Payroll Covered Period generally qualify for forgiveness, but are included in determining whether the employee hit the $15,385 cap. Borrowers should consult with their accountant or payroll provider to determine if the bonus qualifies as payroll.

Amounts paid to owners are limited to: $15,835 or the 8-week equivalent of the applicable compensation in 2019 for an 8-week Covered Period; or $20,833 or the 2.5 month equivalent of the application compensation for a 24-week Covered Period.

What are considered covered utility expenses?

The Loan Forgiveness Application states that covered utility payments are “business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020.”

Like all nonpayroll costs, forgivable utility payments “must be paid during the Covered Period or incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period.”

Does interest accrue during the forgiveness application period?

Yes. Interest begins accruing on the date the loan is disbursed. It appears that Borrowers will be responsible for repaying any accrued interest on loan amounts not forgiven.

What documentation do I need to include in my application for loan forgiveness?

Borrowers using the standard Form 3508 should refer to page 6 of the Form 3508 Loan Forgiveness Application Instructions for a detailed summary of required documentation that must be submitted to lenders. The summary itemizes required documentation for the following categories: Payroll, FTE, and Nonpayroll.

Borrowers using the streamlined Form 3508EZ should refer to page 4 of the Form 3508EZ Loan Forgiveness Application Instructions.

Additionally, these pages include a description of documents that borrowers must maintain but are not required to submit as part of their forgiveness applications. These documents must be maintained by Borrowers for a period of six years after the date the loan is forgiven or repaid in full, and borrowers must permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request.

What happens if not all of my loan is forgiven?

Any outstanding principal balance or interest that has accrued on the unforgiven loan amount must be repaid. Interest continues to accrue at a rate of 1% of the loan amount during the deferment period.

If the Borrower applies for loan forgiveness within 10 months after the end of the loan forgiveness covered period, the lender must notify the Borrower of remittance by SBA of the loan forgiveness amount (or notify the Borrower that SBA determined that no loan forgiveness is allowed) and the date the first payment is due.

If the Borrower does not submit a loan forgiveness application within 10 months after the end of the loan forgiveness covered period, the Borrower must begin paying principal and interest after that period. For example, if a Borrower’s PPP loan is disbursed on June 25, 2020, the 24-week period ends on December 10, 2020. If the Borrower does not submit a loan forgiveness application to its lender by October 10, 2021, the Borrower must begin making payments on or after October 10, 2021.

The total unforgiven principal and interest must be repaid within five years of initial loan disbursement.

 

What if my payroll costs change during the eight-week period?

If your payroll costs change due to a reduced number of FTEs that do not qualify for a Safe Harbor or other exception, then your loan forgiveness amount will be reduced proportionately.

If your payroll costs change due to reduced salaries, your eligible amount of forgiveness will be reduced if your total payroll costs fall below 60% of the total loan amount. Note that if an employee did not work for the Borrower in 2019, or earns in excess of $100,000 but experienced a salary reduction, these salaries are not factored into the calculation.

How do I calculate my payroll costs if my loan funds are received in the middle of a pay period?

A Borrower’s “Covered Period” begins on the date PPP loan funds are disbursed by the lender. At this time, it does not appear that the covered period can be backdated to a period prior to receipt of loan funds. However, there is now an “Alternative Payroll Covered Period” for employers who use a “biweekly (or more frequent) payroll schedule”. Borrowers must consistently use the Covered Period or Alternative Payroll Covered Period throughout their application where there is an option between the two.

The Alternative Payroll Covered Period allows Borrowers to start their forgiveness covered period “on the first day of their first pay period following their PPP Loan Disbursement Date.” The Loan Forgiveness Application Instructions give the following example for an alternative eight-week period:

If the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20.

See the Loan Forgiveness Application Instructions for additional details.

I have already laid off or reduced salaries for some employees before applying for this loan. Can I rehire or increase pay for those employees?

Yes! Borrowers can rehire any staff that were laid off or put on furlough and reinstate any pay that was decreased by more than 25% to meet the requirements for forgiveness before the end of the covered period.

I have extended offers to some of my employees who were laid off and now they are refusing to come back to work? Will my loan forgiveness be impacted as a result?

No, if a Borrower follows the SBA’s guidance. The SBA has confirmed that if an employer makes a “good faith, written offer of rehire” to their employees, and those employees refuse the offer to return to work, the Borrower will not be penalized and those employees will not be counted towards a reduction in headcount. The Borrower needs to provide documentation that they made an offer of rehire and that the employee has rejected the offer. The Borrower must also inform the applicable state unemployment insurance office of the employee’s rejected offer of reemployment within 30 days of the employee’s rejection of the offer. Additionally, if the Borrower previously reduced an employee’s hours, but makes a good-faith, written offer to restore those hours, at the same salary or wages, during the Covered Period or Alternative Payroll Covered Period and the employee rejects such offer, the Borrower’s loan forgiveness amount will not be reduced.

Can you provide any clarity about the eight-week period for FTE count vs. the June 30th week ending FTE count?

The June 30, 2020 date has now been extended to December 31, 2020. This date is used for determining whether a Borrower qualifies for a Safe Harbor from a reduction in loan forgiveness due to either a reduction in the average number of FTEs or a reduction in compensation during the covered period.

In determining whether or not the Salary/Hourly Wage Reduction Safe Harbor is met, Borrowers must enter the average annual salary or hourly wage for each employee in the Table 1 worksheet as of the earlier of December 31, 2020, and the date the loan forgiveness application is submitted. If an employer anticipates having to cut wages later in the year, it may be in their interest to submit the loan forgiveness application sooner than later.

Are there any other exceptions to a reduction in loan forgiveness if the Borrower experiences an FTE Reduction?

Yes. FTEs whose positions are not filled by new employees are considered “exceptions” if they fall under one of the following situations:

  1. Any FTE positions for which the Borrower made a good-faith, written offer to rehire an employee during the Covered Period or Alternative Payroll Covered Period, which was rejected by the employee and is documented.The Borrower must also report the employee’s refusal to return to work to the applicable state unemployment insurance office.
  2. FTE was fired for cause.
  3. FTE voluntarily resigned.
  4. FTE voluntarily requested and received a reduction in their hours.

Borrowers should carefully document any of the above situations to qualify for an exception to a reduction in loan forgiveness.

I am self-employed and have a PPP loan. What amount of my loan is eligible for forgiveness?

The amount of loan forgiveness can be up to the full principal amount of the loan plus accrued interest. However, for self-employed applicants, forgiveness for owner compensation is limited to 8/52 of 2019 net profit and deductible mortgage, rent and utility expenses. The actual amount of loan forgiveness will depend, in part, on the total amount spent over the covered period on:

  • Payroll costs including salary, wages, and tips, up to $100,000 of annualized pay per employee (for eight weeks, a maximum of $15,385 per individual), as well as covered benefits for employees (but not owners), including health care expenses, retirement contributions, and state taxes imposed on employee payroll paid by the employer (such as unemployment insurance premiums);
  • Owner compensation replacement, calculated based on 2019 net profit, with forgiveness of such amounts limited to eight weeks’ worth (8/52) of 2019 net profit, but excluding any qualified sick leave equivalent amount for which a credit is claimed under section 7002 of the Families First Coronavirus Response Act (FFCRA) (Public Law 116-127) or qualified family leave equivalent amount for which a credit is claimed under section 7004 of FFCRA;
  • Payments of interest on mortgage obligations on real or personal property incurred before February 15, 2020, to the extent they are deductible on Form 1040 Schedule C (business mortgage payments);
  • Rent payments on lease agreements in force before February 15, 2020, to the extent they are deductible on Form 1040 Schedule C (business rent payments); and
  • Utility payments under service agreements dated before February 15, 2020 to the extent they are deductible on Form 1040 Schedule C (business utility payments).

Do lease payments include payment for personal property such as business vehicles, as well as real property?

Yes. Pursuant to the Loan Forgiveness Application, covered rent obligations include “business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020.”

Accordingly, lease payments for business vehicles generally should qualify, provided that the lease was in force before February 15, 2020.

How do I qualify for using the Form 3508EZ in lieu of the standard Form 3508 for loan forgiveness?

The SBA has created a streamlined form called 3508EZ that can be used in lieu of the SBA’s full Form 3508 if one of the following three requirements are met:

  • The borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the Borrower Application Form (SBA Form 2483).
  • The Borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or the Alternative Payroll Covered Period compared to the period between January 1, 2020 and March 31, 2020. (“Employees” means only those employees that did not receive, during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000);

    AND

    The Borrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the Covered Period. (Ignore reductions that arose from an inability to rehire individuals who were employees on February 15, 2020 if the Borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020. Also ignore reductions in an employee’s hours that the Borrower offered to restore and the employee refused.)
  • The Borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or the Alternative Payroll Covered Period compared to the period between January 1, 2020 and March 31, 2020;

    AND

    The Borrower was unable to operate during the Covered Period at the same level of business activity as before February 15, 2020, due to compliance with COVID 19-related government requirements or guidance issued between March 1, 2020 and December 31, 2020.

If the Borrower qualifies for any of those three categories, no adjustment must be made for FTE Reductions or Salary/Hourly Wage Reductions, so the calculation form is shorter and there is no Schedule A Worksheet. Rather, the Forgiveness Amount will be the smallest of:

  • The sum of payroll costs and eligible non-payroll costs;
  • PPP loan amount; and
  • Payroll costs divided by 0.6

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