- Applying for PPP Loan Forgiveness
- Calculating Loan Forgiveness Amount
- What If I Can’t Get PPP Loan Forgiveness?
If you’re one of the many small business owners who received a PPP loan , you may be wondering how to apply for loan forgiveness. Here’s a quick guide on what you need to do.
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Applying for PPP Loan Forgiveness
If you’re a small business owner who took out a Paycheck Protection Program (PPP) loan to keep your business afloat during the COVID-19 pandemic, you may be eligible for loan forgiveness. The process of applying for forgiveness can seem daunting, but we’re here to help. In this article, we’ll walk you through the steps of how to apply for PPP loan forgiveness.
Obtain and complete the PPP Loan Forgiveness Application Form
You can find the PPP Loan Forgiveness Application Form on the SBA’s website. This form is used to calculate how much of your PPP loan may be forgiven. You will need to provide information about your business, such as payroll costs, number of employees, etc.
Once you have completed the form, you will need to submit it to your lender. Your lender will then have 60 days to review and approve your loan forgiveness application.
Include required documentation
To apply for forgiveness of your Paycheck Protection Program (PPP) loan, you (the borrower) must complete this Loan Forgiveness Application (the Application), which includes:
-This Instructions document;
-The Borrower’s Certification;
-The Loan Forgiveness Calculation Form; and
-Supporting documentation consisting of the following:
Payroll documentation verifying the eligible cash compensation and non-cash benefit payments for each employee, averaged over the covered period or the alternative payroll covered period; and Documentation verifying eligible self-employed earnings or owner compensation replacement.
Calculating Loan Forgiveness Amount
Determine eligible payroll costs
To be eligible for loan forgiveness, you’ll need to have used your PPP loan proceeds on certain “payroll costs” and other qualifying expenses, and you’ll need to have kept detailed records of how you used the funds. Here, we outline what types of expenses qualify for loan forgiveness and how to calculate the amount that may be forgiven.
Determine eligible payroll costs
Payroll costs are eligible for loan forgiveness if they were incurred during the 8- to 24-week period beginning on the date you received your PPP loan (the “covered period”). These costs include:
-Salary, wages, commissions or tips (capped at $100,000 on an annualized basis for each employee)
-Employee benefits including vacation, parental, family, medical or sick leave
-Allowance for separation or dismissal
-Payments for group health care benefits, including insurance premiums
-State or local taxes assessed on employee compensation
To calculate your eligible payroll costs, you’ll need to use one of two methods outlined in the CARES Act: the “alternate payroll covered period” or the “8-week covered period.” If you choose to use the alternate payroll covered period, your loan forgiveness will be based on eligible payroll costs incurred during any consecutive 24-week period within the 8-week covered period. This means you have more flexibility in when you bring back employees and incur eligible payroll costs.
Calculate the covered period
To calculate your loan forgiveness amount, you will need to first determine your covered period. This is the time frame during which you can incur eligible expenses that will be forgiven.
The covered period for PPP loans began on the date your loan was funded and ended either 24 weeks later or on December 31, 2020, whichever came first.
If you received your loan before June 5, 2020, you have the option to choose either a 8-week or 24-week covered period. If you received your loan on or after June 5, 2020, your covered period is automatically set at 24 weeks.
Once you have determined your covered period, you will need to calculate your total eligible expenses. Eligible expenses include payroll costs, mortgage interest payments, rent payments, and utility payments.
You will then subtract any advance payments you received from your total eligible expenses. The difference will be your potential loan forgiveness amount.
To apply for loan forgiveness, you will need to submit a Loan Forgiveness Application to your lender along with documentation supporting your eligible expenses.
What If I Can’t Get PPP Loan Forgiveness?
You may be wondering what to do if you can’t get PPP loan forgiveness. The Paycheck Protection Program (PPP) is a federal loan program that helps small businesses keep their workers employed during the COVID-19 pandemic. If you’re a small business owner who has taken out a PPP loan, you may be eligible for loan forgiveness. However, there are some situations where you may not be able to get your loan forgiven.
Refinance your PPP loan
If you can’t get PPP loan forgiveness, you have a few options. One option is to refinance your PPP loan into a conventional small business loan. You may be able to do this through the Small Business Administration’s 7(a) loan program or through a conventional lender.
Another option is to negotiate with your lender to extend the term of your loan or to defer payments. This could give you more time to get your business back on track so that you can eventually repay the loan.
You could also try to sell your PPP loan to another business owner who is interested in taking over the payments. This may be difficult, but it could be an option if you’re struggling to make payments and want to avoid defaulting on the loan.
Finally, you could just continue making payments on the loan and hope that eventually you’ll be able to pay it off. This isn’t the ideal situation, but it may be the best option if you can’t find another way to repay the debt.
SBA Loan Forgiveness Program
The SBA Loan Forgiveness Program provides loan forgiveness for certain small business owners who have taken out an SBA loan in response to the coronavirus (COVID-19) pandemic.
To be eligible for loan forgiveness, you must use the loan proceeds for eligible expenses, such as payroll costs, rent, mortgage interest, or utilities, and you must maintain your employee headcount and salary levels. You must also agree to certain terms and conditions, such as maintaining good faith efforts to rehire any laid-off employees.
If you are unable to get full PPP loan forgiveness, you may still be able to get partial forgiveness. The amount of loan forgiveness will be reduced if you reduce your workforce headcount or salaries, or if you do not use at least 60% of the loan proceeds for payroll costs.
You will not be required to repay any portion of your loan that is forgiven. However, if you do not apply for loan forgiveness, you will be required to repay the entire loan plus interest. You will have up to 10 years to repay the loan, and no payments will be due until your application for forgiveness has been decided.