MEMBER FDIC 1 EQUAL HOUSING LENDER PPP Forgiveness
MEMBER FDIC 1 EQUAL HOUSING LENDER PPP Forgiveness Application Process
Welcome David K. Adkins PRESIDENT & CEO, BLACKHAWK BANK COO, BLACKHAWK BANCORP, INC. “The advice you need for the life you want” 2
Coming Up ü Business and Economic Survey to Clients ü Follow-up with summarized responses for participating Calendar o o o Today ü Feel free to submit questions at any time ü There will be a Q & A session after the main presentation ü Disclaimers ü Changing Daily 3
What Will We Cover Today? • • Basic Forgiveness Overview Forgiveness Application Discussion of Key Elements Loan Forgiveness Reductions Our Forgiveness Process Documentation Requirements Q&As “The advice you need for the life you want” 4
‘Elephant in the Room’ – Potential Modifications • • • Extend “Covered Period” from 8 to 24 weeks Alter Payroll / Non-Payroll split from 75/25 to 60/40 Extends the Safe Harbor date Allows deferment of payroll taxes Also conversation around a simplified application for loans less than $350, 000 Produces an many questions as problems solved “The advice you need for the life you want” 5
Basic Forgiveness Overview • Forgiveness Application released by SBA • Must be Borrower completed • We can help interpret guidelines, but you must apply to your situation • Compensation Expenses • Must constitute at least 75% of eligible Forgiveness • Lease Expense • Mortgage Interest • Utility Expenses DETAILS ARE SUBJECT TO CHANGE “The advice you need for the life you want” 6
Self Employed or Independent Contractor • Self-employment income as evidenced with 2019 Federal Tax Return (not required to be filed yet) • Health insurance and retirement benefits for owner are excluded • Process should be relatively simple • 8 weeks of 2019 Schedule C – Net Profit DETAILS ARE SUBJECT TO CHANGE “The advice you need for the life you want” 7
Compensation Expenses • Gross salary, wages, commissions or tips (annualized limit of $100, 000) • Paid vacation • Parental, family, medical, or sick leave • Excluding Family First Coronavirus Response Act eligible for tax credits • Separation or dismissal expenses • State or local taxes paid by the employer • Health insurance costs paid by employer, including premiums (non self-employed) • Medical, Dental, Employer Paid has contributions, etc. DETAILS ARE SUBJECT TO CHANGE 8
Compensation Expenses – CON’T • Payment for retirement benefits (non self-employed) • Employer paid expenses such as 401 K, ESOP, etc. • Must constitute at least 75% of potential Forgiveness • Can choose an alternate period • Shift Covered Period to next Pay Period beginning • Only for those with weekly or bi-weekly payrolls • Bonus, premium pay, hazard pay is all acceptable • Owners or Owner-Employees, including self-employed or general partners are limited to the lessor of $15, 385 or 8 weeks of 2019 compensation “The advice you need for the life you want” DETAILS ARE SUBJECT TO CHANGE 9
Lease on Real and Personal Property • Dated prior to February 15, 2020 • Related Party Real Estate lease has not been addressed, so likely acceptable • Leases on equipment is also likely acceptable DETAILS ARE SUBJECT TO CHANGE “The advice you need for the life you want” 10
Mortgage Interest on Real or Personal Property • • • Dated prior to February 15, 2020 No principal allowed Cannot prepay Interest on Line of Credit (LOC) secured by mortgage appears acceptable Interest on other secured debt appears acceptable, but… DETAILS ARE SUBJECT TO CHANGE “The advice you need for the life you want” 11
Utility Expenses • • Dated prior to February 15, 2020 Some beneficial clarity here Paid -OR- incurred Paid within “Covered Period” – obviously okay Incurred within “Covered Period”, but paid at next due date – also okay Includes all typical utilities, including company contracted cell phones Transportation expense is still needing definition or clarity Other utility expenses incurred by the business DETAILS ARE SUBJECT TO CHANGE “The advice you need for the life you want” 12
Loan Forgiveness Reductions • This is where the application process begins to get confusing • Confusion comes because of all the date periods that need to be examined • Compensation Reduction and FTEE Reduction “The advice you need for the life you want” 13
Loan Forgiveness Reductions: Compensation • Only relevant for employees who earned annualized wage based on any pay period in 2019 less than $100, 000 (i. e. $1923 weekly or $3846 biweekly) • Compare wages earned during Covered Period to Reference Period of January 1, 2020 and March 31, 2020 • If wages reduced by more than 25%, reduction in Forgiveness is dollar for dollar in the wages that were reduced by more than 25% (first 25% is not a reduction in Forgiveness) • For hourly employees, utilize the hourly wage, not total pay to calculate DETAILS ARE SUBJECT TO CHANGE “The advice you need for the life you want” 14
Loan Forgiveness Reductions: FTEE • Compare average FTEE count during Covered Period to one 2 Reference Periods (an additional period for seasonal) • February 15, 2019 TO June 30, 2019; OR • January 1, 2020 TO February 29, 2020; OR • For Seasonal Businesses Only: May use any 12 week period between May 1, 2019 TO September 15, 2019 • Full-time employees count as 1. 0 based on average of 40 hours, regardless of overtime • Part-time employees can be counted based on average actual hours or at. 5 • Furloughed employees, voluntary terminations, and the refused offers to rehire • If count is less during Covered Period than Reference Period, then reduction in Forgiveness is made • Safe Harbor guidelines reflect June 30, but will need to be redefined if legislation changes • If FTEE are reinstated • If reduction in pay is restored DETAILS ARE SUBJECT TO CHANGE 15
Loan Forgiveness Application – SBA Form 3508 • Blackhawk will send 2 emails to our PPP clients next week • One will include: • A list of 7 items specific to your business to help complete the application • Another will include: • A copy of a fillable SBA Forgiveness application • A worksheet we have developed to help make some of the employee calculations – simplifies the PPP Schedule A Worksheet • The SBA 3508 Form is a tedious/frustrating document (similar to a tax return) DETAILS ARE SUBJECT TO CHANGE 16
SBA Form 3508 – CON’T • The SBA 3508 Form has 4 parts • Forgiveness Calculation Form • PPP Schedule A Worksheet • PPP Borrower Demographic Information Form (optional) • Will be bouncing back and forth between the first three parts of the form • Should complete Schedule A worksheet first DETAILS ARE SUBJECT TO CHANGE 17
Blackhawk’s Forgiveness Application Process • We will need: • • PPP Forgiveness Calculation Form PPP Schedule A Blackhawk Bank completed Worksheet All supporting documentation • Submit all documents to SBAForgiveness@Blackhawk. Bank. com • Timeframe • No required date for you to submit an application • Note that original loan may require 1 st payment in November • Lenders have 60 days from date of completed application received • SBA then has 90 days to act on our submission “The advice you need for the life you want” DETAILS ARE SUBJECT TO CHANGE 18
Some Points to Keep in Mind • The SBA can audit any loan and Forgiveness request • You must retain all of your documents for 6 years from the date the loan is full paid • You will be making certifications and representations that SBA will rely on 19
Necessary Documentation • SBA will require significant documentation of each element • This includes: • Proof of the actual payment of these expenses from your account • Proof of the actual obligation of these expenses • Proof you were obligated on or before February 15, 2020 DETAILS ARE SUBJECT TO CHANGE “The advice you need for the life you want” 20
Payroll • Employee level documentation of payroll costs during Covered Period • Will need employee level amounts due, tied to proof of payment • Could be payroll record with check copy or ACH transaction • Employee level documentation of FTEE during Covered Period / Alternative Period • Employee level documentation of FTEE during chosen Reference Period • Employee level documentation of payroll costs from 1/1/2020 and 3/31/2020 DETAILS ARE SUBJECT TO CHANGE “The advice you need for the life you want” 21
Payroll – CON’T • • Copies of IRS Form 941 that completely covers Covered Period Copies of State quarterly wage reporting and unemployment wage filings Proof of payment of all other benefits (retirement, health care, etc. ) Copies of invoices for all other benefits DETAILS ARE SUBJECT TO CHANGE “The advice you need for the life you want” 22
Lease Expense • Proof of payment for any lease obligations • Will need to show proof of payment from account • Copy of signed lease agreements DETAILS ARE SUBJECT TO CHANGE “The advice you need for the life you want” 23
Mortgage Interest on Real or Personal Property • Proof of payment for any mortgage obligations • Will need to show proof of payment from account • Will need to provide loan statement for principal / interest split • Copy of signed notes, security agreements, and mortgages securing these notes DETAILS ARE SUBJECT TO CHANGE “The advice you need for the life you want” 24
Utility Expense • Proof of payment for any utility expense • Will need to show proof of payment from account • Will need copies of invoices paid • Will need to provide copy of contract or copy of invoices dated prior to February 15, 2020 (reasonably close) DETAILS ARE SUBJECT TO CHANGE “The advice you need for the life you want” 25
Today’s Takeaways • Survey to Clients • 2 Emails to PPP applicants: • 1) List of 7 items • 2) Fillable SBA Forgiveness application • 2)Blackhawk Bank Worksheet to help • No deadline for application submission • 1 st payment may be due Nov • Submit complete application to SBAForgiveness@Blackhawk. Bank. com • Submit questions to SBAInquiry@Blackhawk. Bank. com • Lenders have 60 days • SBA has 90 days • We will continue to monitor 26
Time for Q and A • Submit completed applications to SBAForgiveness@Blackhawk. Bank. com • General questions? SBAInquiry@Blackhawk. Bank. com • The slide deck and recording of presentation will be posted to our website as quickly as possible: https: //www. blackhawkbank. com/business/sba-payroll-protection-program “The advice you need for the life you want” 27
Thank you for attending As always, we thank you for trusting us with your business “The advice you need for the life you want”
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