16 Jul Your PPP Forgiveness Deadline May be Approaching
Are you a business owner who received a first-draw Paycheck Protection Program Loan? Your deadline to apply for loan forgiveness may be on the horizon. Here’s what you need to know about PPP forgiveness.
Your PPP forgiveness period
Depending on when you received the loan and used the funds, your forgiveness period could fall between July and September of this year. For instance, borrowers who received their loan funds in April 2020 and chose an eight-week covered period could have a deadline as early as July.
Borrowers who received funds in April 2020 but chose a 24-week covered period have until the end of August to apply for forgiveness. Reconciled Solutions is encouraging business owners who have questions about when their forgiveness period ends to contact their lenders.
If you don’t file for forgiveness, you’ll be responsible for principal and interest payments on the loan. You can apply for forgiveness at any time before the maturity date of the PPP loan, but you must make loan payments until the forgiveness is filed.
First Draw PPP Loan Forgiveness Terms
According to the SBA, as a borrower of the first draw Paycheck Protection Program, or PPP loans, you qualify for full loan forgiveness if you meet the following criteria during the 8- to 24-week covered period of your loan:
- Maintained employees and compensation levels
- Used the loan to take care of payroll costs and other eligible expenses
- Spent at least 60% of the loan on payroll costs
Second Draw PPP Loan Forgiveness Terms
Loans made to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following loan disbursement:
- Maintained employee and compensation levels in the same manner as required for the First Draw PPP loan
- Spent the loan proceeds on payroll costs and other eligible expenses; and
- Spent at least 60% of the proceeds on payroll costs.
What documentation do small businesses need to apply for PPP loan forgiveness?
The list of documentation required to apply for PPP Loan forgiveness may vary based on the type of business you have. Be ready to provide documentation for all payroll periods that overlapped with the covered period of the PPP loan. These documents include:
- Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees
- Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the covered period
- Payroll tax filings that were reported to the IRS or that will be reported in the future (typically Form 941)
- State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state
- Payment receipts, canceled checks, or account statements documenting any employer contributions to employee health insurance and retirement plans included in the forgiveness amount
Non-payroll expenses covered by PPP forgiveness
The SBA has expanded the list of covered items since the first iteration of PPP forgiveness, which focused primarily on salary expenses and rent. Now, the list includes items such as PPE, software, and supplier costs. Expenses covered by the PPP include:
- Business mortgage interest payments (Provide a copy of lender amortization schedule and receipts verifying payments or lender account statements)
- Business rent or lease payments (Provide a copy of current lease agreement and receipts or cancelled checks verifying eligible payments)
- Utility payments (Provide copies of invoices and receipts, canceled checks, or account statements)
- Operation expenditures related to business software or cloud computing service
- Property damage costs related to vandalism or looting
- Payments made to a supplier of goods
- Worker protection expenditures (masks, sanitizer, etc.)
Submitting the application
Once your documentation is compiled, you’re ready to submit your loan forgiveness application to your lender. Next, if the SBA undertakes a review of your PPP loan application, your lender will notify you of the review and, ultimately, of the SBA’s review decision.
Business owners whose PPP forgiveness requests are denied have the right to appeal certain SBA loan review decisions. Your lender is responsible for notifying you of the forgiveness amount paid by SBA. Additionally, they’ll provide the date on which your first payment will be due, if applicable.
If you need help filling out your forgiveness paperwork or determining your deadline, please don’t hesitate to contact us at assist@reconciledsolutions.net.
