On August 10th, 2020 the Small Business Association (SBA) officially opened up its Paycheck Protection Program (PPP) forgiveness application portal. However, most PPP borrowers are unable to apply for forgiveness due to the reopening of loan applications for PPP 2.0. In the meantime, you can still start taking action now.
The majority of PPP lenders have paused their individual forgiveness applications. Borrowers need to apply for forgiveness through their specific PPP lender, who then send the application to the SBA for further processing and the final forgiveness decision.
Many borrowers feel like they are stuck in a PPP forgiveness limbo waiting on their lender to finally open up applications. While you wait for this to happen, there are still some steps you can take to ensure that your eventual PPP forgiveness application process goes smoothly. You also can review everything you need to know about the PPP and other relief programs in our complete overview.
Below you will find some recommended steps that can help you ensure that you are as prepared for your PPP forgiveness application as possible.
Take time to review the main rules of the PPP. How much of your loan you are able to get forgiven is based on how closely you followed these rules. By reviewing these rules, you can prepare yourself with how much of your PPP loan you should expect to be forgiven. You will also gain an understanding of what types of questions that the application will likely be asking you.
Below is a quick summary of the main PPP rules that you should be aware of. For a closer look at each of these rules, you can check out this dedicated article. If you applied for the PPP as a self-employed individual these rules work a little different for you. For a refresher on how PPP forgiveness works for the self-employed, check out this Accracy article on owner's compensation replacement (OCR).
The PPP must be used on payroll, utilities, rent, and mortgage interest only. Any PPP funds not used on these specified eligible expenses, will not be forgivable!
To achieve full PPP forgiveness, you must spend at least 60% of your PPP on payroll costs. Payments towards independent contractors do not count as a payroll cost. If you spend less than 60% of your PPP on payroll costs, then the amount of your PPP you are able to get forgiven will decrease proportionally.
In order to receive full PPP forgiveness, you must also maintain the same number of employees on payroll throughout the entirety of your PPP covered period. This number of employees must be the same or greater than the number of employees you had in one of the following two time periods.
If the number of employees you have on payroll has decreased during your covered period, then the amount of your PPP that you are able to get forgiven will decrease proportionally. You can read more on FTE requirements for the PPP here.
You must maintain 75% of the total salary of each employee. This requirement will be individually assessed for every employee that did not receive more than $100,000 in annualized pay in 2019.
If an employee's salary decreases by more than 75%, then your forgivable PPP amount will decrease proportionately.
Now that you have reviewed the main rules of the PPP, use this refreshed lens to take a look at how you spent your PPP funds, during your covered period.
If your expenses were used within the guidelines outlined in the above section, you should be in an excellent position for PPP forgiveness.
If you are having trouble understanding your expenses, there are places you can turn for help. A bookkeeping service (like Accracy) can help you understand your expenses, and evaluate them based on the PPP requirements.
If you are working with a payroll provider, they can also be helpful in determining if you are meeting the 60/40 rule along with the staffing and pay requirements.
Take some time to review the standardized SBA PPP forgiveness form. There are two different versions of the SBA PPP forgiveness form called the 3508 form and the 3508EZ form. The main difference between these is the 3508 is the standard form, while the 3508EZ form is a simplified version of the form meant for self-employed individuals.
When you apply for PPP forgiveness, the form you use to apply might look different. This is because each lender's PPP forgiveness application may work differently. By taking a look at these forms you will be able to understand what kind of questions you should be prepared to answer on your application.
If you are interested in learning more here is our step-to-step guides for completing the 3508 form, and the 3508EZ form.
If you are able to understand and complete the SBA forgiveness form, then you are in a great position for your PPP forgiveness application!
Make sure you have all of the necessary documentation available. Exactly what type of documentation you will need to supply will depend both on your business type and on the lender. However, here is a general list of the type of documents you may need to supply:
When your lender's PPP forgiveness application opens you will likely receive an email notifying you that they are now open for forgiveness applications.
Many lenders also have a specific webpage dedicated to PPP forgiveness. This can be a great resource to make sure that you are up to date on any news or changes for your specific PPP forgiveness application process.
It is still possible that the SBA will make some changes to the overall PPP forgiveness application process. To make sure you are best prepared for your forgiveness application, it is imperative to stay informed. One easy way to do this is to read the Accracy blog, which is constantly updated with important PPP updates.
If you wish, you can wait to apply for forgiveness! Technically, you have five years from your PPP origination date to apply for forgiveness. However, if you want to avoid paying any principal or interest payments on your PPP loan you have 10 months after your covered period ends to apply (although interest starts accruing at the origination). Once you apply for forgiveness, you will not be required to make any PPP payments until after you receive a forgiveness decision from the SBA.
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