This page was last updated on 9/14/2020

PPP Top Questions

  1. When can businesses apply for loan forgiveness?
  2. How will businesses apply for forgiveness with F&M Bank?
  3. Are applications for forgiveness from 501(c)(3) non-profit organizations handled differently than other applications for forgiveness?
  4. If a business received EIDL, will this affect the PPP Loan Forgiveness?
  5. If a borrower made a mistake on the PPP Loan Application, can this be fixed on the Loan Forgiveness Application since the numbers may be in misalignment when compared to the original Loan Application?
  6. Can employers use 100% of the loan for payroll?
  7. Can businesses use unforgiven loan amounts for expenditures as they please? (And just accept the excess funds as a loan)

PPP Documentation

  1. If a borrower's 8-week Covered Period or Alternative Payroll Covered Period has already concluded, how should they go about extending their Covered Period or Alternative Payroll Covered Period to a maximum of 24 weeks?
  2. What documentation should borrowers use to represent their 941 since it is a quarterly tax filing?
  3. What kind of documentation is required to support our FTE calculations?

PPP Business Operations

  1. If a business has been forced to close due to “shelter in place” orders, are borrowers required to continue to pay employees even though they are unable to operate their business?
  2. If a business has been forced to close due to the stay at home order, does the 8 week or 24 week period begin once the business is able to re-open for business?
  3. If an owner is in the process of selling the business that received the PPP loan, what will happen if the loan is not forgiven prior to the close of the sale?
  4. How is a business "owner" defined and what percentage of the business must an individual own to be considered an owner?

PPP Full-time Equivalent - FTE

  1. How are part time employees factored into the staffing requirements and forgiveness calculation?
  2. Are businesses allowed to decrease employee salaries as long as compensation does not fall below 75% of the average compensation for the previous quarter?
  3. Are businesses allowed to replace employees that left the business with new employees in order to meet the forgiveness requirements?
  4. Does paid parental leave during the Covered Period or Alternative Payroll Covered Period affect FTE requirements?
  5. If a business has been forced to cut hours due to the shelter in place, should they continue to pay employees to meet the staffing requirements of the program?
  6. What is the definition of a full-time employee?
  7. What is the definition of a part-time employee?
  8. How do businesses include employees who worked over 40 hours into the FTE calculation?
  9. If an employee voluntarily resigns during the Covered Period or Alternative Payroll Covered Period, is the employer's loan forgiveness reduced?
  10. If an employer decreased the hours worked by one employee but increased the number of hours worked by another employee to replace those hours, will forgiveness be affected?
  11. Do temporary furloughs constitute a reduction in headcount? These individuals are not paid during their furlough but continue to receive company benefits.
  12. How are employers required to document and support their compliance with the FTE Safe Harbor in the case that an employee refused the offer for rehire, that the business was unable to find qualified individuals for rehire, or that the employer was unable to operate at the same level of business activity as it was operating before February 15, 2020 due to compliance with COVID-19 requirements?
  13. If borrowers use all of their funds before the end of the Covered Period, are they required to maintain the same number of FTE once all of the funds have been spent?
  14. Is the FTE reduction quotient calculated by evaluating the average number of FTE during the Covered Period (or Alternative Payroll Covered Period) or the number of FTE at the end of the Covered Period (or Alternative Payroll Covered Period)?
  15. Some seasonal employers are approaching the end of their busy season. Employees will be laid off until the start of the next busy season even though there is time still remaining in the Covered Period. Will this affect their forgiveness amount?
  16. Will employers receive a reduction in loan forgiveness if they do not rehire employees that were laid off until the end of the Covered Period or Alternative Payroll Covered Period?
  17. Is the reduction in employee hours evaluated on a total business or individual employee basis?
  18. Can a borrower make reductions in payroll after the Covered Period is over, but prior to submitting the forgiveness application without reducing their amount of forgiveness?
  19. How do borrowers calculate FTE if they have different employees at the end of the Covered Period than at the beginning of the Covered Period?
  20. If an employee retired during the Covered Period, how will FTE and forgiveness be affected?
  21. If our full time employees at our business work less than 40 hours per week, will this affect our forgiveness amount?

PPP Loan Forgiveness

  1. When can businesses apply for loan forgiveness?
  2. How do FTE requirements apply to seasonal employers?
  3. If a borrower made a mistake on the PPP Loan Application, can this be fixed on the Loan Forgiveness Application since the numbers may be in misalignment when compared to the original Loan Application?
  4. If a business received EIDL, will this affect the PPP Loan Forgiveness?
  5. Is the forgiveness amount going to be considered taxable revenue to the business?
  6. When is the forgiveness application due?
  7. Where do employers include bonuses and benefits on the PPP Loan Forgiveness Application?
  8. A business was looted badly. This resulted in employees quitting and reduced payroll. Will this circumstance meet the requirements of the FTE Safe Harbor when evaluating loan forgiveness?
  9. Are applications for forgiveness from 501(c)(3) non-profit organizations handled differently than other applications for forgiveness?
  10. Are borrowers allowed to apply for forgiveness before the end of their Covered Period if they have already spent all of the original loan funds?
  11. Are borrowers allowed to choose more than 8 weeks but less than 24 weeks for their covered period?
  12. Do borrowers need to establish a separate bank account for the loan funds?
  13. Do borrowers need to notify the lender if they wish to extend their Covered Period or Alternative Payroll Covered Period past 8 weeks?
  14. Does the requirement to exclude non US residents include non US residents with a work permit?
  15. How does the PPP loan forgiveness apply to an S-Corp CEO who takes periodic owner draw but is not on payroll?
  16. How long will the forgiveness process take?
  17. How will businesses apply for forgiveness with F&M Bank?
  18. Is forgiveness affected if a business is considered either an Essential or Non-Essential business?
  19. Will borrowers have the opportunity to dispute the forgiveness decision if they do not receive full loan forgiveness?

PPP Loan Funding

  1. Is the loan taxable income?
  2. If borrowers have used all of their PPP loan funds before the end of the Covered Period, are they allowed to apply for more funds now that the length Covered Period has been extended?
  3. Will there be another round of PPP loan funds where borrowers can apply for additional funds?
  4. If my original loan application has the incorrect number of employees listed, what should I do?

PPP Forgiveness Application

  1. Are seasonal employers eligible to use the EZ form for forgiveness?
  2. If a business decides to apply for forgiveness before the end of the Covered Period, are the FTE levels and compensation compared to the levels at the time the application is submitted?
  3. If a business reduces salaries by less than 25%, can they still use the EZ form?
  4. If a business will not feel the effects of COVID-19 until a few months after the Covered Period, should the employer wait to apply for forgiveness until their books show the challenges they expect to encounter to show their need for the PPP loan funds?
  5. Are borrowers to list all expenditures for payroll, utilities and rent on the forgiveness application even if the forgiveness amount requested exceeds the original PPP loan amount?
  6. Can the Safe Harbor rule be used to qualify for the EZ application? For example, if a borrower's FTE levels were reduced due to COVID-19 restrictions, are borrowers still eligible to use the EZ application to apply for forgiveness?
  7. Do all borrowers have the option of an 8-week or 24-week Covered Period?
  8. If a borrower has an employee who is earns more than an annual salary of $100,000, are they still eligible to use the EZ form?
  9. If a business decides to apply for forgiveness before the end of the Covered Period, are the FTE levels and compensation compared to the levels at the time the application is submitted, or at the end of the year (12/31/2020)?
  10. Can you apply for forgiveness using the EZ form if you received an EIDL?
  11. If we spent all of the funds on payroll, do we need to provide information or documentation on non-payroll expenditures?
  12. Is there a dollar amount of a PPP loan that determines whether or not you can use the EZ form?

PPP NonPayroll Costs

  1. Are borrowers allowed to pre-pay expenses during the Covered Period or Alternative Payroll Covered Period for payments that will be accrued and due after the Covered Period or Alternative Payroll Covered Period?
  2. Are loan payments eligible for forgiveness?
  3. Are non-payroll expenditures limited to the Covered Period or Alternative Payroll Covered Period, or can they be accrued before the Covered Period?
  4. Do utility payments need to be prorated to match the 8 week or 24 week period?
  5. Does rent only include workspace/real estate? Or are payments to rent vehicles and equipment also covered?
  6. If employers decrease the number of employees during the Covered Period or Alternative Payroll Covered Period, is forgiveness for non-payroll costs affected?
  7. What specifically is covered under "Non-Payroll Expenditures"?
  8. What specifically is covered under transportation costs?
  9. What types of loan interest is covered under "Non Payroll Expenditures"?
  10. Are HOA and condominium fees included under rent expense?
  11. Are long term disability and long term life insurance forgivable expenses?
  12. Can borrowers back pay utility and rent payments using the PPP Loan funds if they are behind on payments
  13. Is interest paid on vehicles and equipment forgivable, or is it strictly limited to mortgage interest on real-estate?
  14. Are borrowers required to submit the actual lease agreement to document rent expense?
  15. Are costs associated with the purchase of Covid supplies forgivable expenditures?
  16. Are employee cell phone bills forgivable expenditures?
  17. If a business owner owns and leases the property to the business, can rent and interest be included in the forgiveness calculation?
  18. Is interest on an unsecured credit line a forgivable expense?
  19. Is land for agricultural clients an eligible rent expense?
  20. A business was transitioning from one office to another in February. We agreed to the new lease on February 13th but did not begin paying rent until March. Since we were already in a lease and moved to another building, would rent payments under the new lease qualify for forgiveness?

PPP Payroll

  1. Are employers allowed to grant bonuses?
  2. Are 1099 employees included in payroll forgiveness?
  3. Are businesses allowed to add employees to payroll during the 8 week period and the funds for those additional employees be forgiven?
  4. Are businesses allowed to add employees to payroll during the Covered Period or Alternative Payroll Covered Period and the funds for those additional employees be forgiven?
  5. Are employer taxes paid on payroll also forgiven?
  6. Are employers allowed to distribute excess loan funds to employees as bonuses?
  7. Are gross wages prior to withholding taxes (and not net pay amounts) eligible payroll costs?
  8. Can a seasonal employer pay more than the Covered Period cap of either $46,154 for a 24-week period or $15,385 for an 8-week period to a single employee during the Covered Period or Alternative Payroll Covered Period if the annual pay does not exceed $100,000?
  9. Can employees receive unemployment and PPP funds at the same time?
  10. Can employers issue payroll during the Covered Period or Alternative Payroll Covered Period for time that was accrued prior to the Covered Period or Alternative Payroll Covered Period?
  11. Can wages paid during the Covered Period or Alternative Payroll Covered Period also be deducted from income for tax purposes?
  12. Does the distribution of payroll need to fully align with the 8 week or 24 week period?
  13. If a Schedule C taxpayer reports more than $100,000 in net profits, can he/she use the entire PPP loan proceeds for payroll?
  14. What benefits are included in payroll costs?
  15. Will the payroll be deductible for income tax purposes?
  16. Are employee benefits for employees earning over $100,000 annually in excess of their salary forgivable?
  17. Are union benefits included in payroll costs?
  18. Can employers use 100% of the loan for payroll?
  19. If 401K and health insurance benefits are paid annually or semi-annually by employers, how should employers calculate the benefits expenses during the Covered Period or Alternative Payroll Covered Period for all employees?
  20. Is owner compensation included in payroll?
  21. Are employee dental plans includable in the forgiveness calculation?
  22. Are employer FICA contributions forgivable expenditures?
  23. Are fees paid to a payroll processing a forgivable expense?
  24. Do pay reductions also apply to employees who are commission based?
  25. If an employee resigned and received their PTO balance at the time of resignation, will this amount be a forgivable expense outside of the annualized $100,000 limit?
  26. Which specific state and local payroll taxes are included in forgiveness calculations?
  27. Why are Federal taxes excluded from Payroll forgiveness?
  28. Are businesses allowed to increase salaries over the Covered Period or Alternative Payroll Covered Period? How would an increase in pay impact forgiveness?

PPP Sole Proprietors

  1. How is forgiveness calculated for sole proprietors?
  2. Are owner benefits included for an S Corp?
  3. As a sole proprietor, can borrowers use some of the PPP loan to pay estimated taxes on the loan amount provided? Or is this loan not taxed for some reason.
  4. What is included in the maximum 40% of non-payroll expenditures for self-employed individuals?
  5. Will PPP proceeds paid to a sole proprietor be taxable to a sole proprietor as these are not wages similar to the normal use of proceeds?
  6. Is health insurance included in payroll costs for self-employed individuals?
  7. Can an independent contractor using a home office include home mortgage interest as an eligible expense?
  8. Can the spouse of the owner of a Sole Proprietorship be included in forgivable payroll costs?
  9. How does a sole proprietor provide documentation with the Loan Forgiveness Application? Are they to write checks to themselves out of the PPP loan funds?
  10. If a sole proprietor is receiving unemployment under PUA, are they allowed to being disbursing payroll using the PPP loan funds at the end of their unemployment period?
  11. I am a new sole proprietor and have no historical look back period to use for comparison. Will I have to pay back the loan in full?

PPP Unforgiven Loan Amounts

  1. Can borrowers return funds they know will be in excess or unforgiven without any penalty?
  2. Can businesses use unforgiven loan amounts for expenditures as they please? (And just accept the excess funds as a loan)
  3. Has guidance been released how to approach a situation where a business cannot repay the unforgiven loan amount?
  4. How is the monthly payment calculated for the remaining loan amounts after forgiveness is determined? Will this amount include interest?
  5. When does interest on the loan begin to accrue? Will interest be included in the forgiveness amount?
  6. If a borrower ended up not needing the funds and returns the original loan amount in full, will they be required to pay interest?

Disclaimers:

  • As a Borrower under the Paycheck Protection Program, it is your sole legal responsibility to comply with all laws and regulations applicable to Borrowers under the Small Business Administration Paycheck Protection Program (SBA PPP).
  • Farmers & Merchants Bank urges SBA PPP Borrowers to closely review the latest SBA PPP law, regulations and guidelines (Guidelines). The Guidelines can be found on the Small Business Administration and the Department of Treasury websites: www.SBA.gov and www.Treasury.gov. Farmers & Merchants Bank cautions you that the Guidelines are evolving. The Small Business Administration periodically updates the Guidelines. Some updates modify prior Guidelines, other updates provide further clarification.
  • Farmers & Merchants Bank does not provide legal, tax, or accounting advice. Individual facts and circumstances vary from Borrower to Borrower which will impact any answers regarding any interpretation of questions. You should consult with your legal, tax, and accounting advisors to obtain advice regarding your specific situation. Our education materials and communications should be considered in connection with, and are not intended to replace or serve as a substitute for, your close review of the Guidelines, and legal, tax or accounting advice you are urged to obtain from your tax, accounting and legal advisors.
  • Our communications are summaries or excerpts of the Guidelines, and may contain our opinions or interpretations of the Guidelines. There may be interpretations that are valid that differ from our interpretations and opinions. You are cautioned against placing undue reliance on our views and our educational materials.