How to Pay Back Your PPP Loan

Have you received a PPP loan for your small business? Here’s how to pay it back.

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Introduction

Assuming your business is still operational and you’ve used the loan for its intended purposes, you have two options for paying back your PPP loan: through regular installments or through forgiveness. If you choose forgiveness, you’ll need to submit a request to your lender along with documentation supporting your request.

If you decide to make regular installments, your loan will have a 1% interest rate and you’ll have up to five years to repay the loan (or longer if you agree to an extended repayment plan with your lender). You’ll need to begin making payments on the loan six months after you received the funds, even if your application for forgiveness is still pending.

Before you decide how to pay back your PPP loan, it’s important to understand how forgiveness works and what documentation you’ll need to submit in order to request it.

What is a PPP Loan?

A PPP loan is a government-backed loan designed to help small businesses keep their workers employed during the coronavirus pandemic. The Paycheck Protection Program provides loans of up to $10 million to small businesses and nonprofits that can be used to cover payroll and other eligible expenses. Loans are 100% forgiven if theborrower uses them for eligible expenses and keeps their workers employed for at least eight weeks.

How to Pay Back Your PPP Loan

If you have a Paycheck Protection Program (PPP) loan through the Small Business Administration (SBA), you may be wondering how to pay back your PPP loan. The process is actually pretty simple. You will need to work with your lender to determine a repayment plan. You will also need to make sure that you use the PPP funds for their intended purpose, which is to keep your employees on the payroll and maintain your business operations.

Forgiveness

The Paycheck Protection Program (PPP) loan forgiveness process is as follows:

1. You (the borrower) will submit a forgiveness application to your lender.
2. Your lender has 90 days to review and approve your application.
3. The SBA then has up to 90 days to review your lender’s decision and issue a final decision.

If you are approved for forgiveness, you will not be required to repay the loan. If you are not approved for forgiveness, you will be responsible for repaying the loan in full, with interest, over a period of 2-5 years.

Deferral

The Paycheck Protection Program (PPP) loan forgiveness application requires you to calculate your full-time equivalent employees (FTEs) and your covered period. The SBA generally defines a full-time equivalent employee as someone who works 40 hours a week, although some exceptions exist. If you have part-time employees, you’ll need to do some math to calculate your FTEs.

The deferral period is the time during which you are not required to make payments on your PPP loan. The deferral period begins on the date that your loan is funded and ends on the earlier of the date that you receive forgiveness or 10 months after the covered period ends.

Prepayment

Prepaying your PPP loan is a great way to save on interest and get rid of your debt as quickly as possible. There are a few things to keep in mind before you make a prepayment, though.

First, check with your lender to see if there are any prepayment penalties. Some lenders may charge a fee if you pay off your loan early, so it’s important to know what, if any, fees you’ll be responsible for.

Next, make sure you have the cash on hand to cover the prepayment. You don’t want to put yourself in a situation where you can’t make your regular payments because you’ve used all of your available funds to prepay your PPP loan.

Finally, once you’ve made the decision to prepay, be sure to notify your lender in writing so that they can adjust your payment schedule accordingly.

Prepaying your PPP loan can save you money in the long run, but it’s important to do your research and make sure you can afford the upfront costs before making a decision.

Conclusion

If you received a Paycheck Protection Program (PPP) loan, you may be wondering how to pay it back. The good news is that as long as you use the loan for its intended purpose – which is to keep workers employed – you will not have to pay the loan back.

However, if you do not use the loan for its intended purpose, you will be required to pay it back. The best way to ensure that you do not have to pay the loan back is to use it for its intended purpose: keeping workers employed. If you have any questions about how to do this, or if you are having trouble paying back your PPP loan, please contact your lender.