PPP Forgiveness Underway this Month

Blog October 20, 2020 by Laurel Sykes

The SBA began accepting PPP Loan Forgiveness applications on August 10, 2020, and earlier this month, American Riviera Bank was one of the first banks in the nation to begin receiving forgiveness on PPP loans.

American Riviera Bank has been successful in obtaining PPP loan forgiveness for many of our ARB customers! The SBA began accepting PPP Loan Forgiveness applications on August 10, 2020, and earlier this month, we were one of the first banks in the nation to begin receiving forgiveness on PPP loans for our clients. 

The SBA and U.S. Treasury, using joint rulemaking authority, has issued a new two-page, 16-question, streamlined application, which exempts borrowers of less than $50,000 from forgiveness penalties for reducing the number of full-time employees or salaries/wages and requires fewer calculations.  Borrowers are still required to provide the same documentation to support their calculations on payroll and nonpayroll costs to their lender as with the EZ application form.

“When a borrower submits SBA Form 3508S or lender’s equivalent form, the lender shall:

1. Confirm receipt of the borrower certifications contained in the SBA Form 3508S or lender’s equivalent form.
2. Confirm receipt of the documentation the borrower must submit to aid in verifying payroll and nonpayroll costs…”

In addition to filling out basic business contact information, and providing documentation to their lender, borrowers on the form must provide:

• Their PPP loan and PPP lender numbers
• Loan amount
• Number of employees at the time of the loan and at the time of the forgiveness application
• Information about any EIDL Advance or application
• The requested forgiveness amount
• Form of business, and
• Tax Form utilized

Don’t want to wait for a new form? You can apply through our online portal using the old EZ form if you have not reduced wages or earnings of individual employees AND

• you have not reduced FTE or hours or
• you have a COVID-19 order impacting your ability to restore your FTE.  

If you don’t meet the criteria for the streamlined application or the EZ form, you will be required to apply using the full loan forgiveness application.

When should I apply forgiveness?

We encourage you to contact your financial advisor to determine the best timing to apply for loan forgiveness based on your individual situation; however, you will want to take action now to elect your covered period. You may remember that the Paycheck Protection Program (PPP) Flexibility act provided an alternative covered period of 24-weeks, in addition to the original 8-week period.  We will soon be sending out communications to confirm whether you wish to elect the 24-week covered period for forgiveness.  If you received a loan prior to June 5, 2020, you will automatically default to an 8-week covered period unless you take action to elect the 24-weeks.  You must begin making payments of principal and interest 10 months after the end of your covered period on any loan balance not forgiven, so please watch your email for next steps.

What happens if I only receive partial forgiveness on my loan? 

The deduction of EIDL advances from the forgiveness amount remitted by the SBA is the most common reason we are seeing an outstanding balance, and it is one of the biggest changes in recent SBA guidance.  The CARES Act only contemplated refinancing EIDLs received before April 3; however, the latest FAQs on Loan Forgiveness indicate that SBA will deduct the amount of any Economic Injury Disaster Loan (EIDL) advance received by a PPP borrower from the forgiveness amount remitted to the lender.  Other reasons include inability to restore wages or salaries, and/or inability to spend at least 60% of the forgiveness amount on payroll expenses.

If SBA approves only partial forgiveness or withholds the EIDL advance, you will be required to begin making payments to the Bank. If the payments are not made, the loan would be considered in default on the loan obligations per the Disbursement Page of your PPP Loan Agreement.  The Bank would then look to the SBA to collect on the government loan guaranty.  Once SBA pays the Bank, they will then go directly to the borrower to collect the outstanding loan balance.   

We will continue to post updates on the latest developments as we receive more information on the PPP page of our website.

Thanks for reading, and stay well!