June 1, 2020
Here's info you need for the month of June. Remember that the Minnesota Conference Finance and Administration Department staff are here to support you. You can look back on recent Finance & Admin Notes newsletters here.
Payment Protection Program Loan Forgiveness
Many of our local churches received a payment protection program loan from their local Small Business Administration (SBA) lender (bank). If your church has not applied for this loan, funds are still available by contacting your local SBA bank.
For those who received the loan, your church has the option of applying for forgiveness or repaying the loan with 1% interest. Please note that you will work with your bank on repayment or forgiveness. Most of our local churches will be applying for forgiveness. View the instructions and application for forgiveness.
The application for forgiveness and supporting documents will be submitted to your local bank; larger banks will soon have a portal available to take the application and documents.
The following information is taken from the SBA loan forgiveness application. This application is daunting. Please feel free to reach out to Barb Brower or Sheri Meister with questions as your church completes the loan forgiveness application.
How to submit documentation to your bank to receive forgiveness and turn the loan into a grant:
- Gather this information:
- Original Payroll Protection Program loan application
- Loan Agreement paperwork
- Records of operations expenses for past 8 weeks
- Historical payroll records
- Complete PPP Loan Forgiveness Calculation Form at the link provided above.
How much of my loan will be forgiven?
You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the eight weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25 percent of the forgiven amount may be for non-payroll costs.
You will also owe money if you do not maintain your staff and payroll.
- Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
- Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
- Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
The summary of eligible costs for forgiveness and documentation required per the application are:
-
Eligible payroll costs for the covered period or the alternative payroll covered period.
The covered period is the eight-week or 56-day covered period of your PPP loan. This would be the first day of the PPP loan. For example, if your church received the loan on Wednesday April 22, 2020, that would be the first day of the covered period. In other words the date does not correspond to your payroll cycle but to the loan date.
The alternative payroll covered period allows the borrower to elect, for administrative convenience, the eight-week (56-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date. So in the example above, it would be first day of the first pay period after receiving the loan on April 22, 2020.
- Nonpayroll costs eligible for forgiveness consist of:
(a) covered mortgage obligations: payments of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property incurred before February 15, 2020 (“business mortgage interest payments”);
(b) covered rent obligations: business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020 (“business rent or lease payments”); and
(c) covered utility payments: business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020 (“business utility payments”).
An eligible nonpayroll cost must be paid during the covered period or incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period. Eligible nonpayroll costs cannot exceed 25% of the total forgiveness amount. Count nonpayroll costs that were both paid and incurred only once.
Eligible payroll: Documentation verifying the eligible cash compensation and benefit payments for the covered period or alternative payroll covered period. Support may be provided through bank account statements or payroll tax records.
There is also a special salary wage reduction calculator to be used if your church reduced any salary and hourly wages by more than 25% during the covered or alternative payroll covered period.
FTE: Documentation showing (at the election of the Borrower):
a. the average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019;
b. the average number of FTE employees on payroll per month employed by the Borrower between January 1, 2020 and February 29, 2020; or
c. in the case of a seasonal employer, the average number of FTE employees on payroll per month employed by the Borrower between February 15, 2019 and June 30, 2019; between January 1, 2020 and February 29, 2020; or any consecutive twelve-week period between May 1, 2019 and September 15, 2019.
Documents may include payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941) and state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
Non-payroll: Documentation of interest expense, rent or lease payments, and utility payments through invoices and cancelled checks.
An authorized representative will also be required to make certain representations on behalf of the borrower. The authorized representative will be the individual who initially applied for the PPP loan.
