PPP Application Phase
Queenstown Bank of Maryland is not taking applications for the Payroll Protection Program at this time.
PPP Forgiveness Phase
The Department of Treasury and the SBA have not finalized the process and rules for the Forgiveness Phase of the PPP program. The Bank is unable to accept the Forgiveness Application until the final guidance is provided.
On Friday, May 15, 2020, the SBA and the Department of Treasury issue the “Loan Forgiveness Application and Instructions for Borrowers” (“Application”). This is the first step in addressing the forgiveness phase of the Payroll Protection Program.
The Press Release from the Department of Treasury can be found by clicking the following link: https://home.treasury.gov/news/press-releases/sm1010
The Application can be found by clicking the following link: https://home.treasury.gov/system/files/136/3245-0407-SBA-Form-3508-PPP-Forgiveness-Application.pdf
We encourage all borrowers to review the Application closely to ensure that you understand the requirements of this developing program. The SBA has indicated that it will soon issue additional regulations and guidance for borrowers in completing their Application.
The “Forgiveness Phase” is primarily the eight (8) weeks period following the funding of your loan. It is important that you monitor the regulations and guidance issued by the SBA or Department of Treasury to ensure that you receive maximum benefit from this program.
Unless you follow the published regulations and guidance very closely and track your expenditures in detail, YOUR PPP LOAN MAY NOT BE FULLY FORGIVEN.
Your actions in the eight (8) weeks following the funding of your loan, will determine how much of your loan will be forgiven. We are recommending all PPP loan borrowers maintain detailed records of all of your qualified expenditures over the eight (8) week period following the funding of the loan. Although the final process/guidelines for the Forgiveness Phase have yet to be issued by the SBA as of May 18, 2020, there is current guidance available that borrowers should review and follow.
As outlined by SBA in its original guidance, the loan amount will be forgiven as long as:
- The loan proceeds are used to cover eligible expenditures such as payroll, mortgage interest, rent, and utility costs over the 8-week period after the loan is made; and
- The number of employees (“FTE”) and compensation levels are maintained.
- The timing of returning your employees to the payroll matters as it looks at average FTE’s.
- Reduction in pay per employee in excess of 25% will impact your forgiveness.
The Program guidelines state, Loan Proceeds may be used for:
- Payroll cost, including benefits;
- 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; and
- 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.
- Interest on mortgage obligations, incurred before February 15, 2020;
- Rent, under lease agreements in force before February 15, 2020; and
- Utilities, for which service began before February 15, 2020
- Under the current guidance, no more than 25% of the loan proceeds may be for non-payroll costs.
We are asking that all borrowers focus on this as soon as your loan is funded. Your decisions and the timing of those decisions will have a major impact on your forgiveness. You need to ACT NOW.
Please do not hesitate to contact your Loan Officer with questions or to schedule a discussion on the forgiveness phase of this program.