Getting Ready for PPP Loan Forgiveness

Many churches and affiliated institutions of the Diocese of Indianapolis applied for and received loans through the Paycheck Protection Program established by the CARES Act. The loans can be forgiven in whole or in part, provided the funds were used for eligible purposes, including payroll and related expenses, mortgage interest, rent, and utilities, and that payroll expenses make up at least 60 percent of the forgiveness amount requested.

The original bill required that funds be expended for these purposes within eight weeks after loan proceeds were disbursed to be eligible for forgiveness, but an update to the program passed in early June extends that period to 24 weeks. Borrowers who spent funds on qualifying expenses within eight weeks may still apply for forgiveness based on that time frame.

Borrowers will apply to their banks for loan forgiveness, using forms and procedures provided by the Small Business Administration. On June 16, the Small Business Administration released updated guidance and forms for applying for loan forgiveness. The primary form (instructions) requires detailed analysis, but many churches will find that they are eligible to use a streamlined form (instructions and eligibility). Banks may offer electronic versions of these forms, and may require additional documentation, including payroll reports and proof of payment of eligible expenses. Churches should contact their banks for information about deadlines for applying for forgiveness, but should plan to apply as quickly as possible while memories are still fresh and documentation is easily accessible. All documentation related to both the initial loan application and the application for forgiveness must be retained for six years.

Any portion of the loan that is not forgiven must be paid back within two years, unless the loan was issued on or after June 5, 2020, in which case the maturity of the loan is five years. The maturity of loans issued before June 5 may be extended by mutual agreement between borrower and lender.

Congregations with questions or seeking assistance should contact Canon Brendan O’Sullivan-Hale.

© 2021 Episcopal Diocese of Indianapolis