Paycheck Protection Program (PPP)

Paycheck Protection Program (PPP)

­­Updated June 5, 2020:

Congress has passed sweeping changes to the Paycheck Protection Program. They include:

  • Giving borrowers 24 weeks to spend the funds instead of eight
  • Allowing for up to 40 percent of funds to be spent on eligible non-payroll expenses instead of 25 percent
  • Giving borrowers more time to rehire employees without losing forgiveness eligibility
  • Extending the period of time during which borrowers can apply for forgiveness

These are just a few of the changes made, and Pinnacle's PPP experts are combing through the new language right now to find out exactly how they apply to our clients. We will update this page when we have all the details available and communicate them by email and other means. 

You can apply for PPP loan forgiveness starting eight weeks after your loan was funded. That means the people who got their money first are eligible to apply right now.

We believe it may be in your best interest to wait. Congress has approved sweeping changes to the PPP, and we are still determining how they affect our clients. Those changes will make most people eligible for more loan forgiveness than they are right now. So you may be best served by waiting to see how it affects you.

The other benefit to waiting is that the application process will be simpler. We’re putting the finishing touches on our application system right now. Here’s how it will work.

  • It’s all online.
    You will be able to access it and fill it out online. The interface is very simple and user friendly, just a simple online form.
  • It’s self-directed.
    You won’t have to wait on us to help you fill it out. You can do it all by yourself online. It will be sent straight to review and then on to the SBA for a decision.
  • It comes with a tool to help with the figures.
    If you’ve seen the paper application, you know how complex the forms are. For some people, they may be more complicated than a tax return. We’re putting together a calculator tool—much like the one we used when you applied for the loan—to help. You plug in your numbers, and it will give you the figures you need for the application.

Of course, if you’d rather have help, we can do that, too. Just let your financial advisor know how you’d like to proceed when the time comes.

In the meantime, review the guidance we have put together below, but remember that much of it will change based on the June 3 Congressional action. It’s still important to carefully document how you’re spending PPP funds and stay in touch with your financial advisor, CPA and/or attorney for help.

If you have any questions, your financial advisor is just a phone call away, as is our Small Business Client Service Center at 877-380-0654.


To have your loan forgiven, it is important that you closely follow the parameters outlined by the SBA which we have summarized below. It is also important that you honor the spirit of the law: To meet the urgent needs of businesses struggling financially as a result of the pandemic.

The entire amount of this loan, plus accrued interest, has the potential to be forgiven. Here is a general summary of how that process works and the steps you must take to be eligible based on information that the SBA has provided to date. Please read the entirety of this document and consult your financial and/or legal advisor(s) if necessary so you are absolutely clear about the forgiveness parameters.

Download this information in a PDF.

Use this helpful tool to track how you spend your PPP funds.

View a recorded webinar on forgiveness from June 2, 2020.

The Basics

Both principal and accrued interest can be eligible for forgiveness if funds are used for the allowed purposes. The actual amount of the forgiveness will depend, in part, on your total amount of payroll costs, the percentage of FTEs you have retained and other allowable purposes.

These are the forgivable uses. If you spend loan proceeds in these ways, you may be eligible for forgiveness. Forgiveness can be reduced in part or completely depending on the use of funds, timing of that use and employee retention.

  • Funds must be spent within a 24-week covered period.
    • The covered period could start the day you receive the funds. 
    • Or you could choose an “alternative covered period” that will allow forgiveness eligibility for payroll costs beginning on the first day of the first pay period following loan disbursement. Essentially, this means that your covered payroll period could extend past the official 24-week period. You would still be limited to 168 days of payroll costs. See page 1 of the application for the full details.
    • Payroll costs are considered paid on the day paychecks are distributed or the day you originate an ACH transaction for direct deposit. Payroll costs are considered incurred on the day pay is earned.
    • Payroll costs incurred but not paid during the last pay period of the 24-week or alternative payroll covered period are eligible for forgiveness if paid on or before the next regular payroll date.
    • For full details, see page 2 of the application.
  • At least 60% of proceeds must be spent on payroll costs.
    • Based on full employment levels as of Feb. 15, 2020 at no less than 75 percent of 2019 annualized wages or seasonal calculation (up to $100,000 per person)
    • For each individual employee, the total amount of cash compensation eligible for forgiveness may not exceed an annual salary of $100,000, as prorated for the covered period.
    • Count payroll costs that were both paid and incurred only once.
    • For information on what qualifies as payroll costs, see page two of the application and this Interim Final Rule document.
  • No more than 40% of proceeds can be spent on other covered costs.
    • Mortgage Interest – Payments of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property incurred before February 15, 2020
    • Rent – Business rent or lease payments pursuant to lease agreements for real property or personal property in force before February 15, 2020
    • Utilities – Business payments for a service for the distribution of electricity, gas, water, transportation, telephone or internet access for which service began before February 15, 2020
  • Safe harbor provision on staffing levels
    • By no later than Dec. 31, 2020, restore full-employment and salary levels for any changes made between Feb. 15, 2020 and April 26, 2020.
    • Full restoration of FTEs does not necessarily mean they must be filled by the same employees. New hires will be allowed.
    • In determining the rate of forgiveness reduction based on FTEs, the SBA will allow borrowers to choose which period to use as a baseline for employment level comparisons: Feb. 15 to Dec. 31, 2019, or Jan. 1 to Feb 29, 2020.
    • The SBA allows for more time to rehire or an overall an exception in FTE restoration if:
      • you made a good faith effort to rehire workers but those offers were declined
      • the employees who left were fired for cause, voluntarily resigned or voluntarily requested and received a reduction in hours
      • you do not require as many FTEs because you are unable to return to same level of business activity as before the pandemic
      • No matter what, documentation is key. Thoroughly document:
        • all efforts to rehire employees who choose not to accept
        • all dismissals for cause, voluntary resignations and reductions in hours
        • all financial circumstances that lead to an inability to restore full FTE levels

Any use of funds for purposes other than those described above can make you ineligible for full forgiveness. You will then owe part or all of the loan proceeds, plus interest, as you would any other loan. Intentional misuse of PPP funds will lead to required repayment in full and additional liability, possibly including criminal charges for fraud. The SBA will also have recourse against owners, shareholders, members and partners of that business.

Certification of Need

At the time of application, all borrowers certified that that "[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant." The SBA may investigate and require proof of need as part of the forgiveness process. This is an attempt to shape the letter of the law to better reflect its intent, which is to provide relief for small businesses so they may keep staff on payroll and pay essential bills during the crisis. 

  • For Loans Under $2 Million
    • The SBA will assume this certification was made in good faith and the borrower did not have ready access to other sources of capital at the time of application.
    • In other words, small and mid-size borrowers should not worry about getting into trouble over accepting PPP funds and should feel free to spend them for allowable purposes.
    • However, documentation requirements remain intact and these loans are subject to review by the SBA.
  • For Loans Over $2 Million
    • All loans over $2 million will be subject to a full review by the SBA to ensure this certification was made in good faith.
    • Borrowers should take time to carefully consider the certifications made at the time of application and determine the best path forward for their company. 
    • Borrowers who are found to have had ready access to capital, including many publicly traded companies, will be asked to pay back the loan, plus any accrued interest, immediately.
    • If this is done, the matter will be closed and the SBA will not pursue administrative enforcement or refer the borrower to other governmental agencies.
    • If this is not done, the SBA may take additional action, including possible referral for criminal proceedings.

The details of the review process for loans over $2 million have not yet been made clear. As more information is made available, we will share it with you. For now, you can review the SBA’s latest FAQ, paying particular interest to questions 31, 43 and 46. We also encourage you to consult with your CPA and attorney for additional guidance, if necessary.

This is how you request forgiveness.

You will apply to Pinnacle using our online system. We’re putting the finishing touches it now. Here’s how it will work.

  • It’s all online.
    You will be able to access it and fill it out online. The interface is very simple and user friendly, just one form on a single page.
  • It’s self-directed.
    You won’t have to wait on us to help you fill it out. You can do it all by yourself online. It will be sent straight to review and then on to the SBA for a decision.
  • It comes with a calculator to help with the figures.
    If you’ve seen the paper application, you know how complex the forms are. For some people, they may be more complicated than a tax return. We’re putting together a calculator tool—much like the one we used when you applied for the loan—to help. You plug in your numbers, and it will give you the figures you need for the application.

In addition to the application, we will need the corresponding SBA forms and documentation to verify:

  • The number of full-time equivalent employees and their pay rates
  • Payroll expenditures covering the 24-week period following loan origination
  • Payment documentation on eligible mortgage, lease and utility obligations
  • Certification that documents are true and you used the forgiveness amount for eligible purposes

A full listing of records that you are required to maintain are included on page 10 of the application.

We will review your request and the supporting documents. Please understand that it is ultimately your responsibility and not ours to provide and attest to the documentation supporting your request for loan forgiveness. The law says you will be provided an answer within 60 days, but we don’t expect it to take that long. If approved, the SBA will forgive your loan, and we will provide proof of forgiveness for your records. If not approved, we will work with the SBA to determine the amount that can be forgiven, if any. Then we will work with you to determine a schedule for repayment according to the terms of the loan:

  • 1% interest rate
  • Up to 10 months of deferred payments, though interest will accrue over this period
    • This changed from six months due to the June 3 Congressional action. 
  • 2-year maturity
    • For new loans made after the June 3 Congressional action, this changes to 5-year maturity.
  • No prepayment penalties or fees

For more information here is the link to the CARES Act and Interim Final Rule relating to PPP and forgiveness of your loan.

Here is a list of frequently asked questions with thorough answers from the SBA.