If your business was one of the millions that took out a Paycheck Protection Program (PPP) loan in 2020, good news! You may not have to pay it back. The government has announced a comprehensive forgiveness plan for PPP loans to stimulate the economy further. By meeting specific qualifications, some PPP borrowers will not have to repay their loans. You will need to follow the process laid out by the government to obtain loan forgiveness.
Why Is the Government Forgiving Some PPP Loans?
The PPP was passed in the spring of 2020, when COVID-19 shutdowns across the country forced many businesses to close their doors temporarily. These companies faced massive revenue declines, and many struggled to stay afloat without money coming in.
The PPP promised money for payroll and some other expenses to help businesses stay afloat. Many companies wouldn’t have been able to pay their staff without a loan. The PPP stabilized the economy when there was so much uncertainty surrounding the pandemic.
As time went on, most businesses adjusted to the restrictions and have regained their footing. But repaying their PPP loans would put another strain on companies nationwide. Since the government hasn’t passed another round of stimulus, partial PPP loan forgiveness functions as a form of stimulus. It allows small businesses to put their money into other investments, including their employees, rather than paying their loan bills.
Does Your Small Business Qualify for PPP Loan Forgiveness?
The federal government said it would forgive PPP borrowers with loans of $50,000 or below. You must have used the loan for:
- Payroll costs
- Business mortgage interest payments
The borrower must have exhausted all funds from the loan before requesting forgiveness. You can apply for forgiveness at any point before the loan maturity date.
You must send in your application within 10 months of the final day of the period. At this point, your deferred payments become due.
How to Apply for PPP Loan Forgiveness
First, get in touch with your PPP lender. They can provide you with the correct form. You may qualify to fill out a shorter application if you meet certain conditions, and your lender can walk you through the submission process.
Next, you must get your documentation together. You will need payroll and non-payroll forms to submit, including:
- Payroll: Bank account statements, tax forms, payment receipts and canceled checks.
- Non-payroll: Receipts or copies of business mortgage interest payments, rent or lease payments and business utility payments.
You can submit through your lender, who may request additional documentation. Maintain communication with the lender during the process. They will contact you about the Small Business Administration (SBA) loan review decision, which you can appeal under certain conditions. Your lender will also let you know if you still have payments due for portions not forgiven by the SBA.
Learn More About Small Business PPP Loan Forgiveness
Still have questions about PPP loan forgiveness and how it impacts your business? Contact us today to get expert answers to your questions.