What is a PPP Loan Forgiveness?
Contents
If you’re a small business owner who has taken out a PPP loan , you may be wondering if you can get the loan forgiven. Here’s what you need to know about PPP loan forgiveness.
Checkout this video:
What is a PPP loan?
The Paycheck Protection Program (PPP) is a U.S. small business loan program enacted by the CARES Act in March 2020. It is designed to provide an incentive for small businesses to keep their workers on the payroll during the COVID-19 pandemic.
Under the program, small businesses can apply for loans of up to 2.5 times their monthly payroll costs. The loans are 100% federally guaranteed, and if used for eligible expenses, can be forgiven.
How does PPP loan forgiveness work?
Once you have used all of your PPP loan proceeds for eligible expenses and have submitted your forgiveness application to your lender, your lender will review your application and supporting documentation. If they have any questions, they will reach out to you for clarification.
Once they have everything they need, they will send your forgiveness application to the SBA for their review. The SBA has up to 90 days to review your loan forgiveness application and make a decision. If they approve your loan forgiveness application, they will notify your lender and the forgiven amount will be removed from your outstanding PPP loan balance. If they deny your loan forgiveness application, they will also notify your lender and provide the reason(s) for the denial. You will then have the opportunity to appeal the decision if you believe there was a mistake made or you disagree with the SBA’s decision.
What expenses are eligible for PPP loan forgiveness?
To have a PPP loan forgiven, you must use it for eligible expenses within the covered period, which is generally eight to 24 weeks after you receive the loan.
Eligible expenses include:
-Payroll costs, including salary, wage, vacation pay, parental leave, benefits, state and local taxes assessed on employee compensation
-Rent or mortgage interest payments
-Utility payments
-Interest on any other debt obligations incurred before February 15, 2020
-Refinancing an SBA EIDL made between January 31, 2020 and April 3, 2020
How to apply for PPP loan forgiveness?
The Paycheck Protection Program loans are forgiven if all employee retention criteria are met, and the funds are used for eligible expenses. Borrowers do not need to make any payments on their loan until forgiveness is determined. You may apply for loan forgiveness once you have used all of the loan proceeds for which you are requesting forgiveness.
Borrowers must submit a Loan Forgiveness Application to their Lender along with supporting documentation detailing their eligible payroll and non-payroll expenses.
Lenders have up to 60 days to review and approve your application for forgiveness. Borrowers are responsible for retaining appropriate documentation in support of their loan forgiveness application for six years following the date their loan is forgiven or repaid in full.
