So, you want your PPP loan forgiven? Make sure to submit this request


The Paycheck Protection Program (PPP) – the U.S. government’s lifeline for small businesses during the Covid-19 pandemic – has sent a total of nearly $ 800 billion to help businesses keep staff on payroll in 2020 and 2021. PPP loan applications were officially closed on May 31 after available funds ran out sooner than analysts initially expected.

But the confusion remains over loans. The term “loan” itself is not entirely accurate, as the required follow-up “forgiveness” request makes the loan a grant – as long as certain conditions are met.

Contrary to what many might think, forgiveness is not automatically granted or guaranteed. Why? When the pandemic started, Congress wanted to help small businesses get through the crisis. The US Small Business Administration (SBA) was not equipped to distribute these grants, but was equipped to approve the loans. Redesigning this process takes time and Congress has had to act.

Related: 3 Lessons About Small Business Owner PPP Loan Forgiveness

In execution, the process worked like this: Small businesses applied for and received PPP loans. During the period covered, they spent these loans on the appropriate items, mainly the payroll. Now they have to apply for a discount from their lenders and provide the required documents for the loans to be canceled. Lenders have 60 days to respond to these requests.

To date, more than 3.3 million loans, worth a total of $ 279.4 billion, have been canceled, according to the SBA. That leaves nearly $ 159.1 billion in loans to write off, but companies receiving those loans must first take action and apply.

Will your PPP loan be canceled?

In general, your business can expect a loan forgiveness if you have retained or rehired employees while maintaining pre-pandemic salary levels, if you have spent at least 60% of the loan on salaries and the 40 % remaining in other eligible expenses. Even if your business does not meet these criteria (if your workforce or wages have declined, for example), you may still be eligible for a partial discount.

Related: Beginning of the closing of the PPP loan forgiveness period; Payments may be due

Yet there are a number of misconceptions about loan cancellation and the PPP process in general. Some small business owners mistakenly assume that PPP is only for large companies. But as long as a business has fewer than 500 employees and was in operation on February 15, 2020, it is eligible. Some sole proprietors and independent contractors even qualify.

Other businesses assume that if they receive other forms of financial assistance, they are not eligible to receive a PPP loan as well. This is not true. In fact, many companies have received a PPP loan as well as other financial aid from the SBA, such as the Economic Disaster Lending (EIDL) and the 7 (a) loans. However, it should be noted that organizations cannot use their PPP funding and EIDL loan for the same payments.

Finally, many business owners believe the forgiveness process is too complicated and their business might not qualify. It couldn’t be further from the truth. Full forgiveness is not guaranteed, but if you use or use the PPP product according to the rules, forgiveness is likely and is definitely worth pursuing. Even if forgiveness is not possible, the loan terms are generally much better than most: an annual rate of 1% for 60 months with deferred payments for up to 10 months thereafter.

Preparation of the PPP pardon application process

If you haven’t asked for forgiveness, don’t wait any longer. Having the PPP on your books could hinder your ability to obtain financing from some lenders who want the loan to be cleared first. With that said, here are three ways you can prepare to apply:

1. Go over the schedule and make a plan

The cancellation of the PPP loan is done in phases. Applications are open for loans funded until February 28, 2021. This will gradually open over the next few weeks. You can submit a loan forgiveness request at any time on or before the loan maturity date if you have used all of the proceeds.

Related: SBA Issues New EZ PPP Loan Forgiveness Request

The good news is, the process is probably a lot easier than you might think if you follow the instructions and apply on time. Jill Draper, owner of a yarn store in upstate New York, said she essentially had to fill out a few boxes on a mostly auto-filled form from her bank. Ten days later, she received an email confirming that her loan had been canceled in full.

2. Make sure you are spending your money the right way to qualify.

Remember: at least 60% of your P3 loan should go towards payroll, with the remaining 40% going to qualifying expenses. You will need to provide documents on your loan cancellation request, so it is important that you keep good records and that you can provide a breakdown of how you spent the funds in each expense category.

What should you avoid spending your P3 loan funds on? As 22 people who have committed PPP fraud discovered the hard way, jewelry, cars and other luxury personal items are banned.

3. Work with your lender to dig into the details

Your lender is your guide in this process. Ask them to help you distinguish between a PPP1 and PPP2 loan. The process is more difficult for the former than for the latter (one page against 13 pages). Your lender will help you make sure you are following all of the protocols that are appropriate for your particular situation.

The SBA just announced an online consumer-oriented platform where businesses can apply for a PPP loan discount. For loans of $ 150,000 or less – which represent 90% of outstanding PPP loans – companies can apply for a forgiveness themselves. For businesses with loans exceeding this $ 150,000 threshold, the SBA requires lenders to negotiate directly with them. It’s important to keep your lender in your corner and lean on them for support. The SBA is the final decision maker when it comes to loan cancellation, but your lender will act as your lawyer to try to give you the best chance for success and complete cancellation.

P3 loans were designed to be forgiven, but small businesses have yet to claim this forgiveness for it to become a reality. By knowing the deadlines, keeping good financial records, and working closely with your lender, you will prepare your business for success in getting this loan canceled completely, which will further benefit your business and keep it going. forward in a solid position.

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