How to Apply for PPP Loan Forgiveness
Contents
The Paycheck Protection Program (PPP) loan forgiveness process can seem daunting, but we’re here to help. Read on for a step-by-step guide on how to apply for PPP loan forgiveness.
Checkout this video:
What You Need to Know Before You Start
The PPP loan forgiveness process can be a bit daunting, but it’s important to know what you need to do before you start. There are a few things you need to know, such as what documentation you need to provide and what the eligibility requirements are. We’ll go over all of that in this article.
What is the PPP Loan Forgiveness Program?
The Paycheck Protection Program (PPP) Loan Forgiveness Program is a federal relief program that provides loan forgiveness for eligible PPP loans. The program is designed to help small businesses and self-employed individuals keep their employees on the payroll during the COVID-19 pandemic.
To be eligible for loan forgiveness, borrowers must use the loan proceeds for eligible expenses, including payroll costs, mortgage interest, rent, and utilities. Borrowers must also maintain their employee headcount and salary levels during the covered period.
If you are a small business owner or self-employed individual who has taken out a PPP loan, here’s what you need to know about the PPP Loan Forgiveness Program.
What are the eligibility requirements?
To be eligible for loan forgiveness, borrowers must:
-Use the loan proceeds for eligible expenses, including payroll costs, mortgage interest, rent, and utilities
-Maintain their employee headcount and salary levels during the covered period
-Submit required documentation to their lender
What are the Eligibility Requirements?
To be eligible for loan forgiveness, you must use the loan proceeds for approved purposes and meet certain requirements related to employee retention and salary/wage reduction. You will need to submit documentation to your lender supporting your eligible expenses.
Here are the basic requirements:
-Use the loan proceeds for approved expenses: payroll costs, interest on mortgage obligations incurred before February 15, 2020, rent under lease agreements in force before February 15, 2020, and utility payments
-At least 60% of the loan proceeds must be used for payroll costs
-Employee and compensation levels must be maintained: You must not reduce the number of full-time equivalent (FTE) employees or reduce annual salaries or wages of any employee by more than 25% during the covered period compared to the period prior to February 15, 2020
-Rehire workers who were previously laid off due to COVID-19 by December 31, 2020: Employees who were laid off on or after March 1, 2020, can be rehired and are still eligible for forgiveness
-If you have already reduced your workforce or salaries/wages, you must restore them by June 30, 2020: Employees and compensation levels must return to their pre-reduction levels by this date in order to be eligible for forgiveness
-If you are unable to return to your pre-reduction level of business activity due to COVID-19 related circumstances beyond your control by June 30, 2020: You may still be eligible for partial forgiveness
What Documentation Will You Need?
In order to apply for forgiveness, you will need to fill out the SBA Form 3508 and its instructions. This document requests information about your business, your employees, and how you used the PPP loan.
You will also need to provide supporting documentation, which may include:
-Canceled checks or payment receipts showing proof of payment to qualifying creditors
-Bank account statements documenting deposits of the PPP loan into your business account
-Tax forms (e.g. IRS Form 941) or equivalent payroll processor records documenting eligible payroll costs
-Documentation verifying eligible self-employed/sole proprietor income and associated expenses
-Rent/lease agreement(s) for eligible property renovations/improvements
-Canceled checks or invoices documenting eligible property renovations/improvements
Be sure to keep all of your documentation organized and in one place. This will make the forgiveness application process much simpler.
Applying for Loan Forgiveness
How to Apply
The first step is to gather the required documentation. You will need to provide your lender with:
-Your loan forgiveness application
-Your most recent tax return
-Your payroll reports from the covered period
-Proof of any eligible non-payroll expenses
Once you have all of your documentation in order, you will need to fill out your loan forgiveness application. Be sure to include:
-The amount of money you are requesting to be forgiven
-How you used the funds during the covered period
-The number of full-time equivalent (FTE) employees during the covered period
After you have submitted your loan forgiveness application and supporting documentation, your lender has 90 days to review and approve your request. If you are approved, your loan will be forgiven and you will not be required to make any further payments. If you are not approved, you will be responsible for repaying the loan in full.
What Happens After You Apply?
After you apply for PPP loan forgiveness, your lender has 90 days to decide if you’re eligible for forgiveness.
If you are eligible for forgiveness, your lender will send you a forgiveness decision along with any forgiven amount that will be forgiven by the SBA.
If you are not eligible for forgiveness, your lender will send you a denial notice that outlines the reasons why you are not eligible for forgiveness. You may appeal the decision if you believe there was an error in the decision.
Tips for Success
You’ve decided to apply for PPP loan forgiveness, and we’re here to help make that process as smooth as possible. First, it’s important that you understand the guidelines and requirements set forth by the SBA. Next, you’ll need to gather all the necessary documentation to support your application. Finally, you’ll submit your application to your lender. Keep reading for more tips on how to increase your chances of success.
Keep Good Records
One of the most important things you can do to ensure PPP loan forgiveness is to keep good records. You should track how you spend your loan funds and be prepared to show that at least 60% of the loan went to payroll expenses. Other eligible expenses include rent, mortgage interest, and utility payments. Keep all documentation related to your expenditures in a safe place so you can easily access it when you need it.
Another crucial tip is to make sure you apply for forgiveness within 10 months of the end of your covered period. If you don’t, you will have to start making loan payments. So set a reminder in your calendar now so you don’t forget!
Stay Organized
One of the most important tips for success when applying for PPP loan forgiveness is to stay organized. This means keeping track of all the documentation and paperwork related to your loan, including:
-Loan application
-Promissory note
-Lender’s commitment letter
-SBA Form 1502 (if applicable)
-SBA Form 1502 Schedule of Liens (if applicable)
-Evidence of loan disbursement
-Canceled checks or bank statements showing loan disbursement
-Documents supporting payroll costs, such as:
•Payroll tax filings
•Payroll processor records
•Paystubs or other earnings statements
Organizing all of this documentation will make it much easier to fill out the forgiveness application and ensure that you don’t miss anything.
Understand the Process
The Paycheck Protection Program (PPP) loan forgiveness process can seem daunting, but understanding the process and preparing early will help ensure a successful outcome.
The first step is to review the PPP Forgiveness Application and Instructions released by the Small Business Administration (SBA). These documents will walk through the process and answer many of your questions.
Once you have reviewed the documents, you will need to gather the required information and documentation. This includes payroll records, proof of expenses, and any other supporting documentation outlined in the instructions.
After you have gathered all of the required information, you will need to fill out the PPP Forgiveness Application. Once you have completed the application, you will submit it to your lender for review.
Your lender will review your application and supporting documentation to determine if you are eligible for forgiveness. If your application is approved, your loan will be forgiven and you will not be required to make any further payments. If your application is denied, you may appeal the decision or reapply for forgiveness at a later date.
