amount of loan forgiveness will also be reduced by the amount of any reduction in total salary or wages of any employee during the covered period that is in excess of 25 percent of the total salary or wages of the employee during the most recent full quarter in which the employee was employed before the covered period (employees that received more than $100,000 annually for 2019 are excluded). In the event an employer has laid off employees or reduced employee salaries during the crisis, there is a grace period until December 31, 2020 to restore the full-time employment and salary levels for any changes made between February 15, 2020, and April 26, 2020. New Flexibility for Loan Forgiveness Employers are encouraged to maintain their employment and salary levels to avoid jeopardizing loan forgiveness. However, the PPPFA provides that an employer will not have their loan forgiveness amount reduced under the following circumstances. During the period from February 15, 2020, and ending on December 31, 2020, the loan forgiveness amount will not be reduced because of a reduction in the number of full-time equivalent employees, as noted above, if the employer is able to document in good faith: 1. an inability to rehire individuals who were employees of the eligible recipient on February 15, 2020 and an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or 2. an inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19. Loan Payments (If Not Forgiven) If the loan is not forgiven, payments are deferred for six months from the loan origination date at a fixed interest rate of 1%. The borrower can request a repayment term of up to two years. No prepayment penalties or fees apply. No Personal Guarantee No personal guarantee or collateral is required as a condition of the loan and all loan fees are waived. However, the U.S. government will pursue criminal charges against the borrower if the loan proceeds are used for fraudulent purposes. There is no requirement that the employer first make an effort to obtain a loan from another source (as is typical of standard SBA loans). Application Procedure The PPP application is to be made with an SBA-approved lender, which could be the bank that the borrower currently uses or a different bank. In order to process the loan application, the bank may request documentation verifying payroll and other business information, including Forms 941, state income tax and unemployment insurance filings, business tax returns and financial statements. An applicant may also be required to provide substantial additional business and financial documentation pursuant to usual SBA Section 7(a) loan requirements.
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