FAQs —
Who is eligible for this 3508EZ?
The Borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application
The Borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or the Alternative Payroll Covered Period (as defined below) compared to the period between January 1, 2020 and March 31, 2020; AND The Borrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the Covered Period. (Ignore reductions that arose from an inability to rehire individuals who were employees on February 15, 2020 if the Borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020. Also ignore reductions in an employee’s hours that the Borrower offered to restore and the employee refused.
The Borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or the Alternative Payroll Covered Period compared to the period between 01/01/2020 and 03/31/2020 AND The Borrower was unable to operate during the Covered Period at the same level of business activity as before February 15, 2020, due to compliance related to COVID-19.
What is my covered period?
From the day you receive the PPP funding, count for the next 8 weeks to 24 weeks.
What is my loan origination date?
Loan origination date is the date you SIGNED or DOCU-SIGNED your closing documents.
How do I find the original number of employees?
Your original number of employees are the number of employees you have on the PPP application (Form 2483) you submitted to your bank.
Where do I find my Lexicon loan number?
At this point, Lexicon number is our internal number for record keeping purposes, you do NOT have to fill that information in as we will be filling it in for you.
Where do I find my SBA loan number?
Your SBA loan number is the number located on your closing document from Lexicon that was Docu-signed at the time you signed your closing document package. It should be on the little text box on the upper left corner of the first page, noted as SBA Loan number.
What counts as payroll cost?
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
Some of my employees voluntarily resigned, requested a reduction of hours or were fired for cause. Do these situations still count as an FTE reduction?
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.
How do I apply for loan forgiveness?
Lexicon Bank will soon send you an email invitation and detailed guideline to apply for forgiveness through our Docusign portal. Once you click on the link, you will be able to fill out the loan forgiveness form and attach the required documentation directly through our portal.
What can I expect after I’ve submitted my application?
Once you submit your forgiveness application through our portal, Lexicon Bank has 30 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, Lexicon Bank will send your application to the SBA. The SBA will review and respond to Lexicon Bank. You will be notified as soon as we hear from the SBA on your loan forgiveness decision.
Do I need to make payments on my PPP loan after I submit my forgiveness application?
As long as 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. If the loan is fully forgiven, the borrower is not responsible for any payments.
What happens to loan proceeds that are not forgiven?
If only a portion of the loan is forgiven, or if the forgiveness application is denied, any remaining balance due on the loan must be repaid by the borrower on or before the maturity date of the loan. Interest accrues at 1% rate during this period during the time between the disbursement of the loan and SBA remittance of the forgiveness amount. The borrower is responsible for paying the accrued interest on any amount of the loan that is not forgiven.
How can the unforgivable portion of the loan be used?
Proceeds that are not forgiven must be repaid 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
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.
Are increased pay or bonuses forgivable?
If you have less employees now than you did before the crisis, and you increased pay to maximize the use and forgivability of PPP funds until you can hire employees back is acceptable, as long as it is normal payroll or overtime – so basically, a normal practice for hourly, non-exempt employees. There is currently a grey area around the topic of bonuses and we recommend to take a careful approach and not count on bonuses as forgivable expenses.
Can I use Quickbook tags to track use of forgivable funds?
You can use Quickbooks tags for easy tracking, but note that these likely won’t be enough and you should still collect hard proof (payroll registers, rental invoices or any receipts of forgivable expenses, as mentioned above).
How does the PPP interact with the SBA EIDL loan advance?
The EIDL loan advance is the part that functions as a grant, for which you typically get $1,000 per employee after applying for a disaster loan directly from the SBA.
Currently, we are still waiting for clearer guidance from the SBA.
Here are a few other things to keep in mind if it applies
If you used PPP to refinance an EIDL loan, only the funds used for payroll costs will be forgiven so be prepared to provide documentation listed above for the EIDL loan too.
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 may be subject to additional liability such as charges for fraud. If one of your shareholders, members, or partners uses PPP funds for unauthorized purposes, SBA will have recourse against the shareholder, member, or partner for the unauthorized use.
SBA has a FAQ document which the SBA keeps updating.
For more information on the rules around forgiveness, please review the Interim Final Rule, the Interim Final Rule – Additional Eligibility Criteria and Requirements for Certain Pledges of Loans, which covers Self-Employed borrowers and the FAQs and other documents found on the Treasury’s website.
Note, you will start the application here in a separate tab window. Do not download a form. Use our form within the Lexicon Bank portal. You can pause and return at any time via a link that will be sent to your email.