PPP Loan Forgiveness

PPP means Paycheck Protection Program. Paycheck Protection Program loan was provided by the federal Small Business Administration (SBA). It offers COVID-19 relief funds to individuals and small businesses who are independent contractors or who are self-employed if they meet the standards of the program.

PPP Loan

Paycheck protection program loans are created to form a direct drive for small businesses to keep their workers on their payroll.

PPP loans can be forgiven if the money is used for reasonable expenses such as payroll, mortgage interest, rent, supplier costs, property damage costs, worker protection, utilities, and operations costs.

Who can Apply for a PPP Loan?

PPP loans can be taken by a wide range of borrowers as long as they were in business before or on February 15, 2020. Eligibility for this loan includes new outlets that should not have more than 500 employees in a particular location.

In addition, 501(c)(6) non-profits and destination marketing corporations are eligible for PPP loans if they meet the limits on size and lobbying. Some funds have been set aside to help specific struggling groups.

Self-employed workers, sole proprietors, side hustle workers, and independent contractors are eligible for PPP loans.

Paycheck Protection Program loans can be forgiven under these terms:

First Draw PPP Loan Forgiveness Terms

First Draw Paycheck Protection Program loans given to eligible borrowers, qualify for full loan forgiveness if the following applies during a covered period of 8 to 24 weeks after the loan disbursement;

Proper maintenance of employee and compensation levels.
The proceeds of the loan are well spent on payroll costs and other qualified costs.
A minimum of 60% of the proceeds of the loan are spent on payroll costs.

Second Draw PPP Loan Forgiveness Terms

Second Draw PPP loans given to eligible borrowers qualify for full loan forgiveness if the following applies during a covered period of 8 to 24 weeks after the loan disbursement:

Proper maintenance of employee and compensation levels in the same way as required in the First Draw PPP loan.
The proceeds of the loan are well spent on payroll expenses and other qualified costs.
A minimum of 60% of the proceeds of the loan are spent on payroll costs.

How to Apply for a PPP Loan Forgiveness

You can apply for forgiveness once all the proceeds of the loan that the borrower is requesting for forgiveness have been used. Borrowers can apply for forgiveness at any time even up to the date of maturity of the loan.

If you do not apply for forgiveness within 10 months after the last day of the covered period, then you will have to make loan payments to your PPP lender as the loan payments can no longer be deferred.

To apply for a Paycheck Protection Program loan forgiveness:

Ascertain whether your lender participates in direct forgiveness via SBA (Small Business Administration). If your lender does not participate in direct forgiveness, you can apply at https://directforgiveness.sba.gov/. If your lender does not participate, you must apply through your lender.
Compile the required documentation as SBA may request information and documents to review the calculations used to determine the loan forgiveness amount as part of the loan review or audit processes.
Submit your forgiveness form and documentation to SBA or your PPP lender.
Monitor your application for forgiveness.

Note that your lender or SBA will notify you of the review and the SBA loan review decision. However, you have the right to plead with certain SBA loan review decisions.

Frequently Asked Questions

Below are some frequently asked questions.

What Does PPP Stand for?

PPP stands for Paycheck Protection Program.

Who is Saddled with the Responsibility of Determining the Amount of Loan Forgiveness?

The United States Treasury and Small Business Administration are responsible for determining the amount of loan forgiveness you can get, which may include partial, full, or no forgiveness.

When Does the Paycheck Protection Program Loan Deferral Period end?

The paycheck protection program loan deferral period ends 10 months following the last day of the covered period of forgiveness if the borrower has not applied for forgiveness on the due date.

What can Lead to Your PPP loan not Being Forgiven?

Your PPP loan may not be forgiven if you fail to spend at least 60% of the funds on payroll expenses.

Conclusion

Under the policy of the PPP loan, lenders can forgive the full amount of the loan if the borrower meets the necessary conditions.