How to Ensure You’re Eligible for Loan Forgiveness
These loans are potentially forgivable by the Federal Government after that eight-week timeline assuming you follow and meet the guidelines set out in the program. As the loans are based on your payroll, their forgiveness is also based on your continuing to keep the employees you currently have.
If you continue to employ all of your employees through this crisis, and you only spend the funds on those qualified expenses, then you are eligible for forgiveness of 100% of the loan given. If you are required to let go of employees during the crisis, then your forgiveness is reduced by the percentage of those employees you let go. So, if you have 5 employees and you have to get rid of 2, then you will still be eligible to have 60% of your loan forgiven.
If you let go of anyone from Feb 15 and for 30 days after the bill is signed, but you are able to bring their role back by June 30, 2020, then you will be eligible for 100% forgiveness. You will need to fill out the requisite paperwork once you’ve made it through the eight weeks and we don’t have a timeline, currently, on when you will receive confirmation of forgiveness, but expect that information to be available as soon as the first group of people starts working through the program.
What to do About Any Unforgiven Portion of the Loan
After the eight weeks are up, and if you had to let go of any of your employees without the ability to bring them back in their same role, then the unforgiven portion of the loan will convert into a 10-year loan at a rate of 4% or less with no need for collateral or personal guarantee.
Your lender (your bank) are being required to defer interest and principal payments for the first six months of the loan. We’re not sure if this starts upon the deposit or after the eight weeks are up, look for clarification as soon as we get it. This ensures that you don’t have to start repaying on the loan as soon as it is received, as you would with normal business or personal loan, and that you and your company are able to survive through this time.