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Paycheck Protection Program (PPP) Loan Forgiveness Information

Kemba Credit Union members may be eligible for SBA Paycheck Protection Program (PPP) loan forgiveness.

If you’ve received a PPP loan from Kemba, here’s what you need to know:

  • The deposit you’ve received is technically a disbursement from a loan, and payments are deferred for 6 months. 
  • The loan will accrue interest at a rate of 1% during the deferment period.

According to the Small Business Administration (SBA), your entire Kemba Credit Union PPP loan may be forgiven if you use the money for eligible expenses during the 24 week period after you received it. 

  • You’ll be able to apply for loan forgiveness through Kemba Credit Union after the 24 week period.
  • When you apply, you’ll need to provide documentation for your eligible expenses. 
  • After the six-month deferment period, any balance (including any accrued interest) that is not forgiven will become an 18-month term for loans issued prior to June 5 and a 54-month term for loans issued after June 5 with an interest rate of 1% and you’ll need to start making monthly payments.

What is the Paycheck Protection Program?

The Paycheck Protection Program was a key way the United States government helped small businesses weather the COVID-19 shutdowns.  The program, funded under the Small Business Administration (SBA), provided loans to businesses to cover eight weeks of payroll and other costs. PPP was intended to keep businesses viable and allow employees to pay their bills. More than 5 million business were approved for funding under the program, accounting for $525 billion in loans.

PPP loans are forgivable if borrowers devote at least 60% of the proceeds to payroll costs. Even if a business falls short of the threshold, partial forgiveness may be an option.

Does my business qualify for PPP Loan Forgiveness?

There are a few key points to keep in mind when it comes to qualifying for PPP loan forgiveness:

  • You must have kept all of your full-time employees on payroll – or have rehired them within 24 weeks of receiving your loan.

  • To qualify for complete loan forgiveness, payroll costs must account for 60% or more of the amount forgiven. Conversely, only 40% or less of the amount forgiven may have been used on non-payroll expenses, such as rent and utilities.

  • If you used less than 60% of your loan on payroll costs, you may be eligible for partial forgiveness.

  • If you are self-employed, you can also qualify for PPP loan forgiveness. You are eligible to claim 2.5 months’ worth of your 2019 net profit to replace lost pay. 

Preparing your PPP Loan forgiveness application

Keep the following tips in mind as you fill out the PPP loan forgiveness application:

  • Don’t rush to apply. Even though the SBA is now accepting loan forgiveness applications, they continue to issue guidance in a frequently asked questions document. These clarifications could help your business qualify for forgiveness, which is why many accountants believe waiting for further clarifications is the best course of action. For example, on August 11, the SBA clarified that employers’ payments toward certain health care benefits are deemed payroll costs eligible for forgiveness. The deadline for PPP loan forgiveness applications has not been announced yet.

  • Make sure you have all the necessary documentation in order. Even if you do not plan on turning in an application immediately, it is important to collect and organize all the documentation you will need to apply. Guidelines can change quickly, so you need to be ready in case requirements change or a deadline is set. 

 

What can I use this loan for?

The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 60% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees. Please refer to the SBA site for eligible expenses.

How and when do I make payments? Will I get a monthly statement?

No payments are due for the first 6 months, which is the deferment period. If any portion of your PPP loan is not forgiven, you’ll need to start making payments on month seven (7). During the deferment period, you can make principal only payments online. After that, if any portion of your PPP loan is not forgiven, you’ll receive a monthly statement and will need to start making payments on or before the due date on your statement. 

After the deferment period, you will be able to pay the remaining balance of your PPP loan online or through the mail. At this time, we cannot accept PPP loan payments at our branches. During the deferment period, you can make principal only payments online.

What are the terms of the loan?

Loans issued prior to June 5 have a maturity of 2 years. Loans issued after June 5 have a maturity of 5 years. All loans have an interest rate of 1%.

Are there any fees for the loan?

There are no documentation or annual fees associated with the loan.

Will my loan be forgiven?

Please refer to the SBA site for more details as they become available.

How do I know how much of my loan will be forgiven?

The amount of loan forgiveness may be up to 100% of the principal amount of your PPP loan plus accrued interest if the money is used for eligible expenses. 

Please refer to the SBA site for more details as they become available.

How do I apply for loan forgiveness?

Kemba will notify you when it’s time to begin your PPP loan forgiveness request, but generally you won’t be able to apply until at least 24 weeks after you received the funds. 

Be prepared to provide documentation for your eligible expenses.

We’ll also update this site with more detailed information on applying for loan forgiveness as it becomes available.

For More Information

To learn more about how to apply and qualify for PPP loan forgiveness, see the SBA’s Frequently Asked Questions on PPP Loan Forgiveness document.