The following FAQs are based on legislation that was passed on December 27, 2020 and additional guidance provided by the SBA in January 2021. These FAQs will be updated if further guidance from the SBA is provided.
Yes, PPP loans are eligible for loan forgiveness—meaning you have no responsibility to repay the loan—if the funds are used for certain business expenses. It's also possible to receive forgiveness for a percentage of the loan vs. the entire loan amount. See "Is it possible to have some of my loan forgiven, but not all?" below.
There are several changes that make the loan forgiveness process easier for many borrowers, such as:
- Simplified application process for loans in the amount of $150,000 or less
- Additional categories for covered forgivable expenses, including operating expenditures, property damage costs, supplier costs, and worker protection (see “What business expenses qualify for loan forgiveness?” below)
- Extensions in the safe harbors that protect against reductions in forgiveness where a business has reduced the number of employees or their wages
For loans in the amount of $150,000 or less, the application process is now simplified. When you apply for loan forgiveness through our PPP portal, you will be asked to provide some information and certifications. For most first-draw loans, including all PPP loans made in 2020, you will not need to provide any documents to Citizens for us to submit the application to the SBA for approval; however, you must retain documentation to substantiate forgiveness.
To qualify for loan forgiveness, the funds must be used on one or more of the following expenses billed or incurred in the 24-week period triggered after you received your loan:
- Payroll costs, including benefits
- Interest on mortgage obligations, where the mortgage obligations originated before February 15, 2020
- Rent, under lease agreements in force before February 15, 2020
- Certain utilities, for which service began before February 15, 2020
With the recent legislation, new categories of forgivable expenses were added, including:
- Operating expenditures relating to payments for business software or cloud computing services
- Costs to repair property damaged in 2020 during any public disturbances, vandalism or looting, to the extent not covered by insurance
- Payments to suppliers for contracts dated before the loan disbursem*nt date and for goods essential to the business operations
- Worker protection expenditures to meet sanitation, social distancing and other Covid-related health requirements
Payroll costs include:
- Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee)
- Employee benefits, including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits, including insurance premiums; and payment of any retirement benefit
- State and local taxes assessed on compensation of employees
- For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee
Yes. You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 24 weeks triggered after you received the loan. Payroll costs must represent at least 60% or the forgiveness amount.
You may also owe money if you do not maintain your staff and payroll, such as:
Your loan forgiveness may be reduced if you decrease your full-time employee headcount.
Your loan forgiveness may also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
You may be able to avoid a reduction in forgiveness if you restore your full-time employment and salary levels by December 31, 2020 (or, for a PPP loan made in 2021, before the last day of the Covered Period). You may also be able to avoid a reduction in forgiveness if you can document an inability to return to your standard level of business activity due to compliance with COVID-19 requirements or guidance issued by the Centers for Disease Control (CDC) or other specific federal entities.
No. You do not need to include employees who voluntarily resigned, requested reduced hours, or were fired for cause in your wage reduction calculation, provided you retain supporting documentation. You can also exclude employees who were fired or furloughed where you made a good-faith, written offer to rehire that was rejected by the employee. You may also be able to avoid a reduction in forgiveness if you can document an inability to return to your standard level of business activity due to compliance with COVID-19 requirements or guidance issued by the Centers for Disease Control (CDC) or other specific federal entities.
Proceeds that are not forgiven must be repaid pursuant to your promissory note, and can only be spent on the following:
- At least 60% of the loan proceeds must be used for payroll costs.
- The remaining 40% of loan proceeds may be spread across the following items only:
- Mortgage interest payments (but not mortgage prepayments or principal payments);
- Rent payments;
- Utility payments;
- Interest payments on any other debt obligations that were incurred before February 15, 2020;
- Operating expenditures relating to payments for business software or cloud computing services;
- Costs to repair property damaged in 2020 during any public disturbances, vandalism or looting, to the extent not covered by insurance;
- Payments to suppliers for contracts dated before the loan disbursem*nt date and for goods essential to the business operations;
- Worker protection expenditures to meet sanitation, social distancing and other Covid-related health requirements.
If you use PPP funds for unauthorized purposes, SBA will direct you to repay those amounts. If you knowingly use the funds for unauthorized purposes, you could be subject to additional liability such as charges for fraud.
Citizens will send you an email invitation to apply for forgiveness through our PPP portal. Once you create your login credentials, you will be able to apply for loan forgiveness and submit any required documentation directly through our portal. As part of your application, you must attest to the accuracy of the reported information and calculations of forgiveness.
An authorized signatory is required to complete the forgiveness application.
There are many resources available to help you prepare your forgiveness application. We recommend that you refer to sba.gov and treasury.gov for additional information. You may also want to discuss your application with your CPA.
Once you submit your forgiveness application through our portal, Citizens has 60 days to review your application and supporting documents regarding amounts eligible for loan forgiveness. The accuracy and completeness of the information you provide will be key to processing your application as quickly as possible. If we have questions about how your loan forgiveness amount has been calculated, we will contact you directly. Once reviewed, Citizens will send your application to the SBA. The SBA will have 90 days to review and respond to Citizens. You will be notified as soon as we hear from the SBA on your loan forgiveness decision.
If you apply for forgiveness within 10 months of your 24-week covered period, your loan payments may be deferred until the date the SBA sends your forgiveness payment. Interest will continue to accrue at a rate of 1% during this period.
You will be notified if the SBA determines that all or part of your loan is not forgivable. If you do not agree with the SBA's determination, you may appeal the decision. The SBA will provide more information on the appeal process soon. You will be required to start repaying any portion of your PPP loan that is not forgiven. The loan term will be two years with a 1% interest rate. There is no prepayment penalty.
