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Frequently Asked Questions

PPP - Loan Forgiveness

We’re proud to partner with NBT Bank in providing informative, timely updates on the ever-changing PPP Forgiveness regulations. Please review our webinars, EZ application update details and more to help support your business in this forgiveness process. To learn more about NBT Bank, visit: NBT Bank – Business.


1. When is the forgiveness application due and what is the process to apply?

The Paycheck Protection Program (PPP) loan forgiveness application must be submitted to the borrower’s lender as forgiveness is not automatic.  NBT Bank will provide an e-mail when the forgiveness application portal is open for its customers, to then complete through the NBT Bank portal workflow.  You cannot submit the Small Business Administration (SBA) forgiveness application PDF directly to NBT Bank.

The forgiveness application process must be submitted to the bank within 10 months following the end of the businesses covered period.

For reference, the SBA forgiveness application and instructions can be found using the links below:


2. What documentation is required for submission?

 Documentation should be provided to support all calculations of forgiveness amounts where applicable. In addition, the following documentation should also be included:

  • Payroll Costs:
    • Cash Compensation
      • Third-party Payroll Reports or Bank Statements
      • Forms 941
      • State Quarterly Wage Reports
    • Non-cash Compensation (Health Insurance/Retirement)
      • Payment receipts, cancelled checks, or account statements.
  • Non-Payroll Costs:
    • Interest
      • Amortization schedule and
      • Cancelled checks or account statements from February 2020 and the covered period.
    • Rent & Lease
      • Lease agreement and
      • Receipts or cancelled checks or lessor account statements from February 2020 and the covered period.
    • Utilities
      • Invoices from February 2020 and the covered period and
      • Receipts, cancelled checks, or statements.

 Forgiveness Reduction Calculations

    • Calculation workbook
    • Payroll/Hour reports from third-party provider
    • Safe harbor support, if applicable (see FAQ #47)


3. How is documentation submitted to the NBT Bank portal?

Additional information will be announced by NBT Bank soon.  Look for an e-mail to obtain the businesses access to the online forgiveness application portal, where you will complete the forgiveness workflow process and upload any applicable supporting files.


4. With respect to the non-forgiven loan amount (if any), is the repayment period based on when you received the PPP loan funds (before Flexibility Act vs. after?)

With the PPP Flexibility Act of 2020, the loan repayment period was only extended from 2 to 5 years for only new PPP loans that were funded on or after June 5, 2020.  If the business received the PPP funds before June 5th, the loan repayment period remains a 2-years if anything was not forgiven.  The business has up to 10 months to submit the PPP Forgiveness Application to the bank and once approved by the Bank and SBA, any amount owed (if any) will start to be paid back immediately.


5. Is it possible to request additional PPP Loan funds now that the covered period is extended from 8 weeks to 24 weeks? If yes, will this be added to my original PPP Loan?

No, the borrower’s original PPP loan amount will not be modified because of the covered period change. We will provide an update if there is any new legislation for a second round of PPP loans.  Please refer to FAQ #7 for additional funding options.


6. How does the Family First Coronavirus Response Act (FFCRA) impact forgiveness?

Exclusions apply for qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (FFCRA) (Public Law 116–127).  Therefore, any cash compensation payroll costs for these costs are not eligible for forgiveness.

Payroll costs for employee vacation, parental, family, medical, and sick leave are eligible for forgiveness.


7. What additional funding sources besides the PPP Loan are there for relief?

The CARES Act established additional relief options to help business through the COVID-19 pandemic.  These options include:

  • Economic Injury Disaster Loan (EIDL) & EIDL Advance

Up to a 30-year amortization with 12 months of payment deferrals at a 3.75% interest rate.  When applying for an EIDL, applicants can receive an EIDL Advance between $1,000-$10,000 grant that you do not need to pay back.  However, the EIDL Advance does reduce the PPP forgiveness.  EIDL loans cannot be used for the same expenses covered by the PPP Loan.

  • SBA Express Bridge Loans

Qualifying small business who currently have a business relationship with an SBA Express Lender can receive up to $25,000 quickly during application process. This loan would be repaid in full or in part by proceeds from the EIDL loan.

  • SBA Debt Relief

Small businesses that have current SBA 7(a) loans, SBA 504 loans, and SBA Microloans, the SBA will pay 6 months of principal, interest, and any associated fees. This relief is not available for PPP loans or EIDL loans.

  • Main Street Lending Program

The Federal Reserve designed Main Street to support small and medium-sized businesses that were unable to access the PPP or that require additional financial support after receiving a PPP loan. Main Street loans are not forgivable.

  • Various tax relief benefits including:
    • Employee Retention Credit
    • Employer Payroll Tax Payment Deferral
    • Families First Coronavirus Response Act (FFCRA)


For more information on funding options, please visit the SBA website here.

For more information on the Main Street Lending Program, please visit the Federal Reserve website here.

For more information on tax credits provided by the FFCRA, please visit the  IRS website here.


 8. How do I determine the start date of the covered period?

The start date of the covered period is the day the PPP loan funds were received by the borrower (i.e., the day the funds were deposited into the bank account). The Alternative Payroll Covered Period (APCP) can be used if you are a bi-weekly or more frequent payroll cycle, which is only applicable for payroll costs.  You cannot use the APCP for non-payroll costs.

Remember to include the start date in your covered period timeframe calculation. For example, PPP loan funds were received on April 20th, the covered period is April 20th – October 4th.


9. How do I elect the covered period I want to use and when is this election made?

The election is made on the loan forgiveness application – you will fill in the “to” and “from” dates based on your start date.  In no event may the covered period extend beyond December 31, 2020.  You do not need to notify the bank if you would like to use the 24-week covered period before completing the forgiveness application.


10. Can I elect a period in between 8 and 24 weeks for my covered period?

Yes, in an interim final rule released by the U.S. Treasury Department on June 22, 2020, borrowers may apply for forgiveness before the end of the 24-week covered period. For example, if the business used all the PPP funds on eligible expenses through week 14, the business could submit for forgiveness using a covered period of 14 weeks.

However, if the business is using a 14-week covered period and had a Salary/Hourly Wage Reductions for any of its employees, the business will need to extrapolate the Salary/Hourly Wage Reduction for the full 24-week period for that calculation.

We expect additional guidance and rules to be issued regarding this from the SBA, so stay tuned.


11. If the 24-week covered period is elected, can I use my PPP loan proceeds before that?

Yes, you can use the proceeds on eligible expenses at any point in time during the covered period.


12. Are funds required to be separated in a separate bank account?

No, you are not required to separate your PPP funds and make payment with only a certain bank account.  Separating funds may provide ease for record keeping but can make it more difficult in issuing payments.


13. How does the Alternative Payroll Covered Period (APCP) work?

The APCP can be elected only by borrowers with bi-weekly or more frequent payroll cycles (i.e., no semi-monthly or monthly payrolls) to calculate only eligible payroll costs, allowing the borrower to shift the covered period (8 or 24 weeks) to line up with the first payroll cycle following the loan disbursement date. The APCP can only be used for payroll costs (both cash and non-cash payroll costs) – it cannot be used for non-payroll costs. In no event may the Alternative Payroll Covered Period extend beyond December 31, 2020.


14. Do seasonal employers have additional covered period options?

No, the covered period starts on the date the loan proceeds were deposited by the bank. See prior FAQ #13 regarding the Alternative Payroll Covered Period (APCP).  Seasonal employers do have the option to use a seasonal comparison period for just the FTE Reduction Quotient.


15. Does the covered period extension from 8-weeks to 24-weeks change the eligible expense forgiveness thresholds for employees/owners over $100k?

The annual cash compensation cap per employee is still at $100k annualized. When electing your covered period, the maximum eligible cash compensation payroll cost per employee would be $46,154 for the 24-week and $15,385 for the 8-week cover period.

For owners, see FAQ #21.


16. What payroll taxes are considered a payroll cost?

For employee cash compensation costs, only use the gross wages paid and do not include any employer taxes.  For example, if an employee’s salary were $100,000/year, the gross wages paid would be $46,154 over the 24-weeks.  The employer would have paid an additional amount for the employer’s portion of social security and Medicare taxes, which should not be included.

State Unemployment Insurance Tax paid by the employer would be included as a non-cash compensation payroll cost.


17. Are bonuses and/or commissions included as payroll costs?

Yes, cash compensation payroll costs include: gross salary, wages, tips, commissions, bonuses, and any similar compensation.  Just remember that the maximum allowed for cash compensation per employee is $46,154 for a 24-week covered period and $15,385 for an 8-week covered period.


18. What is considered a non-cash payroll cost?

Non-cash compensation includes an employer’s cost of: health insurance, retirement plan contributions, and state and local taxes assessed.  Do not include anything paid/withheld by the employee.  For example, if the employer pays $10,000 for the entire health insurance bill but withholds 25% of the cost in the employees’ paychecks, the employer can only indicate that $7,500 was the employer’s portion for health insurance costs.  Current guidance does not specifically include or exclude employer portion of HSA or FSA contributions. Life insurance and workers’ compensation insurance are not eligible for forgiveness.


19. Does the cap per employee include non-cash compensation items (i.e., health care, retirement plan, etc.)?

No, non-cash payroll costs are not included in the cap per employee.  Any amount paid can be included in excess of the maximum.

Note that owners are treated differently than employees, see FAQ #21 through 27.


20. Can an increase in wages, (whether due to wage rate or increased employee headcount) be used toward the forgiveness calculation?

Yes, payroll costs for new hires or replacements are includable as eligible costs for forgiveness as well as any wage increase (subject to the maximum).


21. How is forgiveness for owners pay calculated?

Forgiveness for owners pay is the lesser of the loan proceeds received and paid over the covered period (maximum of $20,833) or compensation as noted below:

  • Self-Employed – Based on 2019 net profit, Form 1040, Schedule C, Line 31, multiplied by 2.5/12.
  • General Partners – 2019 net earnings from self-employment, Schedule K-1, Line 14a (reduced by section 179 deduction, unreimbursed partnership expenses, and depletion from oil & gas properties) multiplied by 0.9235, multiplied by 2.5/12.
  • C and S-Corps – 2019 cash compensation payroll costs, plus employer retirement contributions, multiplied by 2.5/12.
  • If electing the 8-week covered period, maximum of $20,833 is reduced to $15,385.


22. What if I am a Sole Proprietor and operated at a loss in 2019 on my Form 1040 Schedule C, will any portion of my loan be forgivable?

If you are a Sole Proprietor with no employees and operated at a loss in 2019, you should not have been eligible for a PPP loan, and thus not eligible for forgiveness as well.

If you are a Sole Proprietor with employees and operated at a loss, the loan amount calculation would only have included your employees and not have included the owner portion of net earnings.  Therefore, you can still receive forgiveness for any eligible payments to employees but would not be eligible for any owner income for forgiveness.


23. Are 1099 contractors allowed as an eligible forgivable expense?

No, 1099 contractors are not considered an eligible forgivable expense.  These costs should not have been included in the loan applications as well.


24. Are S-Corporation owner’s distributions forgivable payroll expenses?

No, S-Corporation owner distributions are not considered a forgivable payroll expense.


25. How do I calculate forgiveness as a Sole-Proprietor?

Forgiveness for a sole-proprietor is calculated as the lesser of; $20,833 paid during the 24-week covered period, or 2019 net profit, Form 1040, Schedule C, Line 31.


26. Does the increase of an 8-week to a 24-week covered period increase the maximum forgiveness for Self-Employed/Owners?

Maximum forgiveness for an owner of any entity structure is $20,833 with the 24-week covered period ($100,000 divided by 12 times 2.5). Therefore, you may automatically achieve this if you (1) paid yourself this amount and (2) net profits in 2019 was $100,000 or greater (see FAQ #21).

If using the 8-week cover period, you are limited to $15,385 for payroll costs and would need to spend an additional $5,448 on eligible non-payroll costs for complete forgiveness granted if you received the full $20,833 loan amount.


27. Are non-cash compensation costs included for Owners? (i.e., Employer cost of Health Insurance and Retirement Contributions)?

Generally, no.  Non-cash compensation costs are not forgivable for both self-employed individuals and general partners.  S-Corporation owners cannot include health insurance costs as it should already be included in their wages.  S-Corporation owners can include employer costs for retirement contributions.


28. What is included in utilities for non-payroll costs?

Gas, water, transportation, telephone, or internet access for which services began before February 15, 2020.


29. What is included in transportation for non-payroll costs?

This is unclear and we are still waiting on further guidance from the SBA of what exactly is included in transportation.  The only SBA guidance as of this point is for self-employed individuals. The guidance states that gas used for driving a business vehicle is a forgivable use of PPP loan proceeds. This indicates gas and expenses from the standard mileage allowance may be permitted, but still pending more definitive guidance.


30. What is included in rent/lease on real or personal property for non-payroll costs?

  • Office
  • Copiers/Printers
  • Vehicles/Equipment
  • Other Items of Personal Property


31. Are principal & interest payments on a mortgage eligible for forgiveness?

No, only interest is an eligible expense to be included. In addition, prepayments are not eligible for forgiveness.  The debt needs to be directly related to real or personal property and in-place prior to February 15, 2020.


32. Do all operating costs qualify as eligible non-payroll costs?

No, non-payroll costs only include mortgage interest payments on real or personal property, rent or leases on real or personal property, and utilities.


33. Are any COVID-19 related cleaning expenses considered eligible non-payroll costs?

No, costs incurred due to the cleaning and other COVID-19 related requirements are not included as eligible non-payroll costs.


34. Is floor plan interest considered an eligible non-payroll cost?

It is not clear if Floor Plan Interest qualifies as “Debt on Personal Property”.  The National Automobile Dealers Association (NADA) has issued a request to the SBA to further clarify this question. Unless clarified by the SBA, inventory financing should not be considered as personal property and not included as an eligible non-payroll cost.


35. Are self-rentals considered eligible non-payroll costs?

Yes, if the rental agreement was in-force prior to February 15, 2020. The terms of rent must be consistent with the terms prior to February 15, 2020.


36. Am I allowed to prepay rent to include in the covered period as an eligible expense?

No, prepayments cannot be included as eligible forgivable expenses.


37. If I was delinquent on rent and caught up during the covered period, can those back payments be included as eligible expenses?

SBA guidance does not explicitly state that past rents can be included, however, it does imply that any rent payments that were paid during the cover period are eligible forgivable expenses as long as it was not a prepayment and the lease agreement was in place prior to February 15, 2020.  


38. For the Salary/Hourly Reduction, if payroll was reduced greater than 25%, what portion am I penalized for?

You would be penalized for the portion greater than 25%. For example, if your wage reduction were 30% you would be penalized for 5%.  For additional information, see the G&C PPP Loan Forgiveness article here.


39. If I did not reduce any salary/hourly wages or any employees’ hours, are there any calculations I need to do?

No, calculations are not necessary for a business which did not reduce employees’ salary/hourly wages greater than 25% and there was no decrease in FTE’s.  In this scenario, you should utilize the EZ application.  However, the SBA, Treasury Department and lender hold the right to audit you and require supporting documents to prove those claims.


40. If an employee was employed during the comparison period but not the covered period, how do I calculate FTE/Wage reduction?

The Salary/Hourly wage reduction calculation is only applicable for employees during the covered period.  As for the FTE reduction quotient, you would include their hours in the calculation.


41. For the FTE Reduction Quotient, are owners included in FTE calculation?

No, FTE calculations do not include any owner-employees, self-employed individuals, or partners.


42. For the FTE Reduction Quotient, are there any requirements to have the same exact employees in place?

No, if an employee has separated from the company, the company can replace the individual to maintain FTE requirements.


43. For the FTE Reduction Quotient, how is the calculation impacted by seasonal employees?

Seasonal employers can choose the most beneficial comparison period for their average FTE calculation.  Specific to seasonal employers only, they can choose any consecutive 12-week period between May 1, 2019 through September 15, 2019.

In addition, any business can select from the following comparison periods:

  • February 15, 2019 to June 30, 2019; or
  • January 1, 2020 to February 29, 2020


44. How does the FTE Reduction Quotient calculation work when company policy has a normal 35-hour work week instead of 40 hours?

The calculation used for the FTE would be the same for both the comparison period and the covered period. Therefore, it would not result in a decrease of FTE’s.  For example, if using the calculation method, an employee working 35 hours per week during the covered period would equal 0.9 (35hrs/40hrs) and if you compare to a prior reference period that was also a 35 hour work week, you will be comparing 0.9 vs. 0.9 and thus would not be penalized for any reduction in FTE’s.


45. For the FTE Reduction Quotient, if I paid my employee overtime in the comparison period, am I penalized if I did not pay overtime during covered period?

Maybe, for the FTE Reduction Quotient, an employee who worked 40 hours or 50 hours regardless would still result as 1.0 FTE.  But an employee who works 32 hours would result in 0.8 FTE (32/40).  Therefore, you would not be penalized if the employee’s hours were reduced to 40 hours per week but can be penalized if under 40 hours.

Remember that the FTE Reduction Quotient is not based upon an individual FTE (like the Salary/Hourly Reduction) but as a collective total.  Therefore, if Employee A worked 40 hours weeks 1-20 and Employee B worked 40 hours in weeks 21-24, you would still have 1.0 FTE’s each week.


46. When calculating the FTE Reduction Quotient, does the # of FTEs have to meet the required FTE count by 12/31 or does an average # of FTEs have to meet the requirement?

The FTE calculation during the covered period and comparison period is a weekly average.  However, the FTE safe harbor requires employers to restore or exceed the FTE count by 12/31/2020 in comparison to the FTE count as of 2/15/2020.  Not specifically mentioned yet by the SBA guidance, we believe this means the average hours worked within the payroll run that includes December 31st, 2020.


47. What are the documentation requirements to support the FTE Reduction Quotient calculations and safe harbors?

A worksheet should be completed, preferably in excel, to show your calculation.  All amounts used within the worksheet should tie into to your source documentation, which may include either payroll or hour reports.

There should be written documentation for termination/resignation letters and other documents for cause or voluntary employee separation from the company. If you attempted to re-hire employees but were rejected, documentation of a good-faith, written offer to rehire the employee during the covered period for the same wage should maintained.  You must also report to State Unemployment Insurance Office within 30 days of employee refusal, in written letter.

For the inability to return to same level of business safe harbor, documentation may include copies of applicable COVID-19 requirements or guidance for each business location and relevant financial records.


48. Can the ‘Jobs’ on the original loan application be updated if an error was made?

Yes, you should update the “Jobs” number to the correct amount, but you do not need to amend the original PPP loan application.


49. Does the covered period end date change the safe harbor met date?

The covered period end date can also be the safe harbor met date.  For example, if the cover period end date is October 31st, this can also be used as the safe harbor date instead of December 31st. You still have the option to wait until December 31st to reach the safe harbor, if needed.


50. What safe harbors exist related to FTE Reduction Quotient and how would a company meet the safe harbors?

The below are safe harbors specifically related to FTE Reduction Quotient that allow employers to avoid reduction in loan forgiveness. To meet/qualify for safe harbor, the company needs to meet A and B, or C, or D, or E.

  • A – FTE’s from February 15 – April 26, 2020 was less than FTEs as of February 15, 2020
  • B – FTE’s as of December 31, 2020 is equal or greater than February 15, 2020, safe harbor has been met and no FTE Reduction Quotient is required.
  • C – No reduction in the number of FTEs between January 1, 2020 and the end of the covered period.
  • D – If a good-faith, written offer to rehire an employee during the covered period for the same wage but was rejected by the employee, will not result in a reduction of FTE forgiveness. Must report to State Unemployment Insurance Office within 30 days of employee refusal. This is also true if an FTE was fired for cause, voluntarily resigned, or voluntarily reduction in hours.
  • E – If able to document an inability to return to prior February 15, 2020 levels of business activity between March 1 – December 31, 2020 due to maintenance of standards requirements related to COVID-19 for;
    • Sanitation
    • Social Distancing
    • Other Workers/Customer Safety.


51. Does the change from 75%/25% non-payroll cost limitation to 60%/40% non-payroll cost limitation apply to all covered periods if electing original 8-week period?

Yes, this applies to all covered periods.  Including if you elect the original 8-week cover period.


52. Can more than 60% of payroll costs be used toward forgiveness?

Yes, up to 100% of payroll costs can be used towards forgiveness.  This would be ideal as this would eliminate the administrative burden of documenting non-payroll costs for the forgiveness application process.


53. Is partial forgiveness available if payroll costs do not meet at least 60%?

Yes, borrowers can receive partial forgiveness if under 60% of the loan proceeds are spent on payroll.  For example, a PPP loan disbursement was for $100,000.  The business had $55,000 of eligible payroll costs. Therefore, the maximum forgiveness would be $91,667 ($55,000 ÷ 0.6).


54. Am I required to use any portion of the loan towards non-payroll costs?

No, while non-payroll costs are limited to 40% of eligible costs, you are not required to use any portion of the loan towards non-payroll costs.


55. How does the Economic Injury Disaster Loan (EDIL) Advance effect my forgiveness?

The amount of funds received from the EIDL Advance is a grant, generally between $1,000 and $10,000. This will reduce the forgivable portion of your PPP loan.  Note that the EIDL Advance is not the same as the EIDL Loan.


56. Do I need to repay the EIDL Advance?

No, but yes.  The EIDL Advance (of $1,000 – $10,000) does not need to be repaid.  However, it does reduce your PPP loan forgiveness by the amount received, which will need to be repaid.


57. If the loan is deemed forgiven, is it then considered taxable income?

The forgiven loan will be considered tax-exempt income. However, the expenses paid with the loan proceeds are deemed non-deductible expenses by the IRS. This consequently makes the forgiveness taxable. The U.S. Government is in discussions currently on whether to overturn the IRS’s ruling. We will update the FAQ if anything changes.


58. How is the PPP loan, forgiveness and related costs reported in financial statements?

The PPP Loan should be recorded as debt on the date received.  Interest should be accrued for at the on-set of the loan, regardless of the deferral period.

Any costs paid to 3rd parties (accountants, lawyers, etc.) should be capitalized as deferred financing costs and amortized over the life of the loan.

Once approved for forgiveness, the amount forgiven (including the accrued interest related to forgiveness amount) should be recognized as other income – grants on date of forgiveness was awarded.