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PPP Loan Foregiveness

Bank of the San Juans is committed to helping small businesses in our communities recover. We are here to help you maximize your loan forgiveness opportunity.
This page will provide helpful resources for you to prepare for forgiveness of your PPP loan.
We are currently developing a streamlined PPP forgiveness application form to help simplify the application process for our customers. Once complete, we will reach out to borrowers with an invitation to apply. In the mean time, please review the following resources:
(These are sample documents for reference only.)

You have a PPP Loan. What comes next?

The Paycheck Protection Program has provided relief for businesses across the nation that have been impacted by the COVID-19 pandemic. The program provides funds from the government through Small Business Administration (SBA) lenders, and if the funds are used in a particular time frame and for certain expenses, some or all of the loan may be forgiven. Forgiveness simply means the loan proceeds that you received do not have to be paid back. Below, we've outlined some of the steps you should be taking now to ensure that you're ready to apply for forgiveness:

1. Verify eligible expenses

To qualify for loan forgiveness, PPP funds must be used for the following expenses, and they must have been paid or incurred in the 8-week or 24-week period (the "covered" period") from the date you received your loan funds (disbursement date):
  • At least 60% of the funds must be spent on payroll costs, including employee benefits
  • No more than 40% of the funds can be spent on: ◦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

2. Understand potential missteps

You’ll owe money when your loan is due if you use the loan proceeds for anything other than payroll costs, mortgage interest, rent, and utilities payments over the covered period or alternative covered period. Payroll costs must represent at least 60% of the forgiveness amount.
You may also owe money — and your loan forgiveness may be reduced — if you do not maintain your staff and payroll, such as:
  • If you decrease your full-time employee headcount
  • If you decrease salaries or wages by more than 25% for any employee who made $100,000 or less (annualized) in 2019
You might avoid a reduction in forgiveness if:
  • You restore your full-time employment and salary levels by December 31, 2020
  • 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
If you were unable to restore full-time employment and salary levels by December 31, 2020 you may also be able to avoid a reduction in forgiveness if you have documentation showing that:
  • You offered to restore employee hours and the employee(s) refused
  • You made a good-faith, written offer to rehire furloughed or fired workers who were employed on February 15, 2020, and the employee(s) rejected your offer
  • You were unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020
  • Employees voluntarily resigned, requested reduced hours or were fired for cause

3. Gather documentation

Documentation requirements are subject to change, but your business will likely need to submit documentation to:
  • Verify the number of employees on your payroll and their pay rates
  • Record expenses, including collecting cancelled checks, payment receipts, transcripts of accounts, and documents verifying payments for mortgage, lease, and utilities

4. Understand the time frame for loan forgiveness

Once you submit your application, Bank of the San Juans will review it within 60 days; you will hear from us during that time if we have any questions. We will then submit your application to the SBA, whichhas 90 days to review and respond to us. We will contact you as soon as we hear from the SBA regarding your loan forgiveness.

5. Manage funds that aren't forgiven

Bank of the San Juans will notify you if and when the SBA determines the amount of loan forgiveness. More information will be forthcoming from the SBA on this process. The remainder of the PPP funds that aren't forgiven will become a loan with an interest rate of 1%. As long as you submit your forgiveness application within 10 months of the end of your covered period, your principal and interest payments may be deferred until the forgiveness amount is finalized. Any amount of the loan that is not forgiven must be repaid at a 1% interest rate over two years (or five years for loans originated after June 5, 2020). If a mutual agreement is reached by Bank of the San Juans and the borrower, loans with a term of two years may be extended to a term of five years. There are no prepayment penalties.