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As of July 2, 2020: Please be advised, if you have a PPP loan you DO NOT have to do anything or submit anything to us at the moment. This information is simply to prepare for when these steps will need to be taken.

Updated PPP loan forgiveness guidelines: If you are under $2MM you will be deemed to have been acting in good faith.  As more information is provided we will continue to update this page. 

PPP Scenario Calculators 

Calculator Tutorial 

Thursday July 2, 2020

Recently, the SBA released new guidance surrounding the ever-changing Paycheck Protection Program (PPP).  The SBA’s updates to the third and sixth interim final rules provide clarity on some of these changes. Borrowers who either opt into a covered period of 24 weeks, or (in the case of borrowers who secured loans on or after June 5, 2020, are automatically given a 24-week covered period), will be able to provide more payroll per employee. Following the Flexibility Act’s tripling of the covered period’s term, the Final Rule confirms that payroll costs including salary, wages, and tips, up to $100,000 of annualized pay per employee, may be provided for the equivalent of 24 weeks, for a maximum of $46,154 per employee. Covered benefits, including health care expenses, retirement contributions, and state taxes imposed on employee payroll paid by the employer (such as unemployment insurance premiums), are included for employees, but not for the owners.

The update also addresses the differentiation between owners and employees in the calculation of forgivable payroll costs. Owners are accounted for separately, and are subject to different caps, depending on whether they are in an 8 or 24 week covered period:

SBA has determined that it is appropriate to limit the forgiveness of owner compensation replacement for individuals with self-employment income who file a Schedule C or F to either eight weeks’ worth (8/52) of 2019 net profit (up to $15,385) for an eight-week covered period or 2.5 months’ worth (2.5/12) of 2019 net profit (up to $20,833) for a 24-week covered period per owner in total across all businesses.”

The SBA states that this is in keeping with the “structure of the CARES Act and its overarching focus on keeping workers paid, and will prevent windfalls that Congress did not intend.”

Revised Application, New “EZ” Version

In addition to offering guidance (and promising more in the future), the SBA also issued a revised application and an EZ application for borrowers that:

  • are self-employed and have no employees; or
  • did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; or
  • experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.

The EZ application is a two page document, with fewer calculations and less documentation. Borrowers who may qualify to take advantage of this streamlined process should review the list of certifications on page 2 of the application to ensure that they qualify.

Forgiveness Based on a Term Shorter than 24 Weeks

Borrowers need not meet the 60/40 ratio of payroll to non payroll expenses in order to receive any forgiveness; rather, forgiveness will merely be reduced. Another question raised by borrowers was the timeline they could seek forgiveness under the expanded 24 week covered period. This week one SBA official stated that the borrower can elect to apply for forgiveness at the point in time they believe they will meet the qualification. They do not need to wait the full 24 weeks to apply for forgiveness.”

Thursday June 4, 2020

Key Provisions of the Paycheck Protection Program Flexibility Act of 2020


Loan Maturity Date:

The Act extends the maturity date of the PPP loans (i.e. any portion of a PPP loan that is not forgiven) from 2 years to 5 years.  This provision of the Act only affects borrowers whose PPP loans are disbursed after its enactment. 

Deadline to Use the Loan Proceeds:

The Act extends the “covered period” with respect to loan forgiveness from the original 8 week period after the loan is disbursed to the earlier of 24 weeks after the loan is disbursed or December 31, 2020.  Current borrowers who have received their loans prior to the enactment of the Act may nevertheless elect the shorter 8 week period.

Forgivable Uses of the Loan Proceeds:

The Act raises the cap on the amount of forgivable loan proceeds that borrowers may use on non-payroll expenses from 25% to 40%.  The Act does not affect the PPP’s existing restrictions on borrowers’ use of the loan proceeds to eligible expenses: payroll and benefits; interest (but not principal) on mortgages or other existing debt; rent; and utilities.

Safe Harbor for Rehiring Workers:

Loan forgiveness under the PPP remains subject to reduction in proportion to any reduction in a borrower’s full-time equivalent employees (“FTEs”) against prior staffing level benchmarks.  The Act extends the PPP’s existing safe harbor deadline to December 31, 2020: borrowers who furloughed or laid-off workers will not be subject to a loan forgiveness reduction due to reduced FTE count as long as they restore their FTEs by the deadline.

New Exemptions from Rehiring Workers:

The Act also adds two exemptions to the PPP’s loan forgiveness reduction penalties.  First, the forgiveness amount will not be reduced due to a reduced FTE count if the borrower can document that they attempted, but were unable, to rehire individuals who had been employees on February 15, 2020 and have been unable to hire “similarly qualified employees” before December 31, 2020.  Second, the forgiveness will not be reduced due to a reduced FTE count if the borrower, in good faith, can document an inability to return to the “same level of business activity” as prior to February 15, 2020 due to sanitation, social distancing, and worker or customer safety requirements.

Loan Deferral Period:

The Act extends the loan deferral period to (a) whenever the amount of loan forgiveness is remitted to the lender or (b) 10 months after the applicable forgiveness covered period if a borrower does not apply for forgiveness during that 10 month period.  Under the previous rules for PPP, a borrower’s deferral period was to be between 6 and 12 months.

Payroll Tax Deferral:

The Act lifts the ban on borrowers whose loans were partially or completely forgiven from deferring payment of payroll taxes.  The payroll tax deferral is now open to all PPP borrowers.


This act did nothing to ease the process of forgiveness as the current application for forgiveness form is still required. Business advocates and US Banks are seeking a simpler process to determine borrower forgiveness.

Friday May 22, 2020

Treasury Releases Interim Final Guidelines:

Interim Final Rule Addressing Loan Forgiveness Requirements

Key points are as follows:

Timing Requirements
Many borrowers have sought guidance on the deadline for submitting the Loan Forgiveness Application. Our understanding of the rule: Loans that are not reviewed by the SBA prior to the lender’s decision on loan forgiveness, lenders must issue decisions on loan forgiveness to the SBA within 60 days from receipt of a completed application, and the SBA will remit the appropriate forgiveness amount, plus any accrued interest, to the lender within 90 days thereafter.

“Incurred and/or Paid”
The issue of whether expenditures must be both incurred and paid versus incurred or paid within the eight-week forgiveness period has generated considerable confusion. The interim final rule provides that, “In general, payroll costs paid or incurred during the eight consecutive week (56 days) covered period are eligible for forgiveness.” This language appears to suggest that payments made early in the eight-week period are eligible for forgiveness even if they relate to payroll incurred prior to the start of the eight-week period, before we can definitively say this we need more clarification….. Tracking the language of the application, the interim final rule confirms that the eight-week period begins on the date of loan disbursement, although borrowers may elect an “alternative payroll covered period” beginning on the first day of the first payroll cycle after loan disbursement.

Payments to Furloughed Employees, Bonuses, and Hazard Pay
The interim final rule provides that payments of salary, wages, or commissions to furloughed employees, bonuses, and hazard pay are eligible payroll costs, subject to the limitation that cash compensation does not exceed $100,000 on an annualized basis.

Caps on Compensation to Owner-Employees and Self-Employed Individuals
A prior interim final rule limited compensation to self-employed individuals to the lesser of $100,000 per year on an annualized basis or 8/52 of 2019 compensation. The application appeared to expand that rule to owner-employees and general partners without any underlying discussion. The May 22, 2020 interim final rule on loan forgiveness requirements confirms this expansion by stating that owner-employees are capped by their 2019 employee cash compensation, retirement, and health care contributions. Self-employed individuals filing Schedule C are capped at owner compensation replacement income from 2019, in accordance with the prior interim final rule. General partners are limited to their 2019 net earnings from self-employment, reduced by section 179 deductions, unreimbursed partnership expenses, and depletion from oil and gas properties, multiplied by 0.9235. Further, self-employed individuals, including general partners, may not receive forgiveness for retirement or health insurance contributions. Remember that the annualized $100,000 limitation applies to cash compensation in addition to the rules set forth above.

Non-payroll Costs
The interim final rule confirms the prior guidance that non-payroll costs are eligible for forgiveness if (i) paid during the covered period, or (ii) incurred during the covered period and paid on or before the next regular billing date.

Prepayments of Mortgage Interest
Advance payments of interest on a covered mortgage obligation are not eligible for forgiveness. Payments of principal are not eligible under any circumstances.

Offers to Rehire Employees
Eligible loan forgiveness amounts are subject to reductions if the borrower does not maintain the number of full-time equivalent employees, as summarized in prior guidance, and subject to certain exceptions. The interim final rule restates the prior regulatory exemption in which reductions in loan forgiveness are waived where the borrower makes a good faith, written offer to rehire (or restore hours for) an employee during the applicable eight-week period, and the employee rejects that offer. One new requirement applicable to this exemption is set forth in the May 22, 2020 interim final rule, which is that the borrower must inform the state unemployment office of the employee’s rejected offer of employment within 30 days of such rejection.

Full-Time Equivalents
The interim final rule defines a full-time equivalent employee as an individual who works 40 hours or more each week. The SBA considered using a 30-hour standard but determined that the 40-hour standard better reflects full-time employment for most Americans. The interim final rule tracks the application in providing that employees who work 40 hours or more each week are limited to an FTE quotient of 1.0. For employees who work less than 40 hours per week, the borrower may calculate the average number of hours paid per week divided by 40, or the borrower may use an FTE equivalency of 0.5 for each employee. The chosen method must be applied consistently to all employees in all relevant periods.

Salary/Hourly Wage Reductions
The interim final rule restates prior guidance on the salary/hourly wage reduction to loan forgiveness. However, to avoid doubly penalizing borrowers, the rule helpfully states that salary/hourly wage reductions will only be taken into account if they are not attributable to an FTE reduction. An example provides that if an hourly wage employee had been working 40 hours per week but only works 20 hours per week during the covered period, but the employee’s hourly wage is not reduced, the reduction in hours is taken into account for FTE purposes, but the borrower is not required to apply the salary/hourly wage reduction to such employee.

Interim Final Rule Addressing Loan Review Procedures and Related Borrower and Lender Responsibilities

The second interim final rule issued on May 22 addresses loan review procedures and related borrower and lender responsibilities.

 Key points are as follows:

SBA Review of Individual Loans
The SBA may review any PPP loan deemed appropriate, and the SBA Administrator is authorized to review borrower eligibility (based on the CARES Act, subsequent guidance, borrower certifications, the loan application, and the forgiveness application), the amount and use of loan proceeds, and the borrower’s entitlement to loan forgiveness. The SBA may undertake a review of any loan of any size in its discretion. If the SBA identifies that the borrower may be ineligible for a PPP loan in general or ineligible to receive the requested forgiveness amount, the SBA may require the lender to obtain additional information from the borrower, or the SBA may request information directly from the borrower. The SBA will consider all additional information from the borrower in completing its analysis. The SBA intends to issue a subsequent interim final rule establishing appeal procedures for borrowers that disagree with the SBA’s determinations.

Lender Review
Each lender is required to (1) confirm receipt of the borrower certifications in the application, (2) confirm receipt of documentation to aid in verifying payroll and non-payroll costs, (3) confirm the borrower’s calculations on the loan forgiveness application (including cash compensation, non-cash compensation, and compensation to owners, as well as non-payroll costs) by reviewing the documentation submitted with the application, and (4) confirm that non-payroll costs do not exceed 25% of the loan forgiveness request.

The accuracy of the calculations is the responsibility of the borrower, but the interim final rule states that lenders are expected to perform a good-faith review in a reasonable amount of time. The rule provides an example that, where payroll costs are based on a payroll report prepared by a recognized third-party processor, minimal review is appropriate, whereas more extensive review would be required for payroll costs not documented with recognized sources. The lender is not required to obtain independent verification of the borrower’s reported information.

Within 60 days of the receipt of the application, the lender must issue a decision to the SBA either approving the forgiveness amount (in whole or in part), denying the forgiveness amount (in which case it must notify the borrower as well), or, if directed by the SBA, denying the forgiveness amount without prejudice due to a pending SBA review. Within 30 days of receiving notice from the lender, a borrower whose application has been denied may request SBA review of the lender’s decision.

SBA Review
The SBA may review a PPP loan of any size at any time but must notify the lender in writing, and the lender must notify the borrower within five business days. In addition, within five business days, the lender must transmit the initial application and all supporting documentation as well as the loan forgiveness application and all supporting documentation to the SBA. Further, the lender must request that the borrower submit the Schedule A Worksheet, and the lender must submit the worksheet to the SBA within five days of receipt.  Finally, the lender must also submit a signed and certified transcript of account, a copy of the PPP note, and any other related documents requested by the SBA.


Frequently Asked Questions (FAQs) from the U.S. Department of Treasury
As of May 13, 2020

46. Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request? Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates,20 received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith. 

SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns. 

Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.21 

20 For purposes of this safe harbor, a borrower must include its affiliates to the extent required under the interim final rule on affiliates, 85 FR 20817 (April 15, 2020). 
21 Question 46 published May 13, 2020.

We wish to thank you for allowing Citizens National Bank to assist with your Paycheck Protection Program Loan.

The Federal stimulus package, more commonly referred to as the CARES Act, set the rules for the Paycheck Protection Program, and to be frank, most of those rules are still being written. We are reaching out to offer information on what we anticipate will be needed to submit for either full or partial forgiveness on your Paycheck Protection Program Loan.

To ensure proper documentation for loan forgiveness, it is extremely important that you maintain adequate substantiation for all eligible expenses as the funds are being spent. According to the CARES Act, you must provide documentation to verify the use of funds on eligible expenses.

  • Payroll Costs – You must provide documentation to verify the number of full-time equivalent (FTE) employees on payroll and pay rates for the period. We recommend tracking your FTE employee calculation each pay period.
  • Mortgage Interest, Rent and Utilities – You should provide documentation such as cancelled checks, payment receipts, transcripts of accounts or other documents verifying payments on covered mortgage obligations, covered lease obligations and covered utility obligations.

Additionally, you must provide certification that the documentation presented for loan forgiveness is true and correct and the amount for which forgiveness is requested was used for eligible expenses. The SBA has said it will issue additional guidance on loan forgiveness, but at a minimum, you should be prepared to verify all expenses with the documentation.

Understanding the PPP Loan Forgiveness Process

Based upon what we have read from Treasury Department, opinions and industry experts, determining the amount of loan forgiveness can be viewed as a four-part test.

First, you must use PPP loan proceeds for payroll costs, mortgage interest, rent and utilities payments over the eight-week covered period after receiving the loan. It is important to note that the PPP Interim Final Rule published by the Treasury on April 2, 2020 provides that not more than 25 percent of the loan forgiveness amount may be attributable to non-payroll costs.

Second, you must maintain headcount, as loan forgiveness will be reduced if a business decreases its FTE employee headcount. This is determined by dividing the average FTE employee headcount during the eight-week covered period by the headcount during one of the following periods, (at the election of the borrower):

  • Period from February 15, 2019 to June 30, 2019
  • Period from January 1, 2020 to February 29, 2020

For seasonal businesses, the eight-week covered period is compared to the period from February 15, 2019 to June 30, 2019.

The result is multiplied by the loan proceeds spent on qualified expenses to determine the amount that is eligible for forgiveness.

Third, if a borrower decreases salaries and wages by more than 25% for any employee who did not receive, during any single pay period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000, then a portion of the loan may not be forgiven. Under the test to determine if there has been a 25% reduction in salary, you are required to compare total salary and wages of an employee during the eight-week period to the most recent full quarter that the employee was employed. If an employee’s wages or salary decrease by more than 25%, then the difference in excess of 25% is not forgivable. 

(Guidance is still needed from the SBA to address several issues you will face when calculating the 25% reduction. For example, how should bonuses, commissions or other forms of compensation be considered in this calculation for comparing compensation? Additionally, the periods being compared are not comparable based upon the number of weeks being computed, as the calculation requires the comparison of an eight-week period to a thirteen-week period.)

The Act also contains what appears to be a safe harbor for rehires, such that a borrower will not have its loan forgiveness proportionately reduced if the decrease in FTE employee headcount and wages is eliminated by June 30, 2020. To prevent any reductions in the forgiveness provisions described above.

The final and fourth part of the loan forgiveness calculation provides that you have until June 30, 2020 to restore FTE employee headcounts and salary and wage levels for any decreases made between February 15, 2020 and April 26, 2020. For purposes of this test, the number of FTE employees on or before June 30, 2020 is compared to the number of FTE employees on February 15, 2020.

After the eight-week covered period following the loan origination date, you will have 90 days to submit loan forgiveness documentation to the lender. Then, the Citizens National Bank will have 60 days to make a decision on loan forgiveness. Borrowers deferring the employer’s portion of Social Security Taxes under the CARES Act should be aware that they are no longer eligible to defer these taxes once they receive a decision on loan forgiveness from the lender. You cannot use loan proceeds that are forgiven and still deduct that expense for FIT purposes.

We understand this is a lot to digest, and there are still many questions remaining that SBA and Treasury have yet to answer. Our pledge to you is that as we learn more about the final rules we will formulate a plan and pass along pertinent information to you as it becomes available.  

Paycheck Protection Program Loan Forgiveness

The Small Business Administration and the U.S. Department of Treasury have not issued the definitive final rules for borrowers and lenders concerning PPP forgiveness. However, some direction regarding the total percentages used for payroll and other expenses have been published. It is important to note that the PPP Interim Final Rule published by the Treasury on April 2, 2020 provides that not more than 25 percent of the loan forgiveness amount may be attributable to non-payroll costs.

The CARES Act requires you apply to your lender for loan forgiveness within 90 days following the 8 week term after disbursement of your loan.   

Though not an exhaustive list, we anticipate the following items will be required to be submitted for concideration of forgiveness:

  • Verification of the number of FTEEs (full-time employee equivalents) on payroll and their pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance filings.
  • Verification of your payments on covered mortgage interest, rent/lease obligations, and utilities. Documentation such as cancelled checks, payment receipts, transcripts of accounts or other documents verifying payments.
  • Certification from an authorized representative of your company that the supplied documentation is true and that the amount that is being forgiven complies with PPP guidelines.

Once you have submitted your application for PPP Loan forgiveness, your lender must make a decision on your application within 60 days of receipt.

Because of the complexity of PPP loan forgiveness and the many unanswered questions (see below) about how the process works, we encourage all PPP Recipients to keep meticulous records of all PPP-related spending. Document where and to whom each dollar of the loan is spent…..

PPP Amount Not Forgiven: Payback is Required

Any part of your PPP loan that is not forgiven must be paid back, either immediately, in the case of non-permitted use, or in the form of a two-year loan at 1% with a six-month deferment in the case of permitted but not forgivable amounts. Your loan documents provided at closing of the PPP Loan will outline your payments following the initial deferment period.

One such example of a permitted but not forgivable use would be utility costs that push your non-payroll expenses over 25% of the amount forgiven. 

PPP Unanswered Questions

As much as is known about the Paycheck Protection Program, there is equally as much that has not been defined nor explained. As guidance becomes available and to the extent it answers any of these questions, information will be added to this page.

More Information

You can refer to the U.S Department of Treasury for borrower tools and FAQ's.

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