July 1, 2020

PPP Loan Forgiveness: What do you need to know?

Your business may have been one of the many that qualified for the Paycheck Protection Program (PPP), which covered payroll and other expenses during the COVID-19 pandemic. As more businesses begin to reopen and resume normal operations, you may find yourself wondering whether you qualify for PPP loan forgiveness, or if you will have to find a way to pay back the funds you received. Read on for the information you will need and the steps you will have to take to determine if you qualify for PPP loan forgiveness.

Step 1: Understand the Requirements

When the Paycheck Protection Program went into effect earlier this year, businesses had to meet specific requirements to apply for and receive the funds needed to cover payroll and other necessary expenditures to keep their company running. The loan forgiveness application follows a similar path, with a process in place to ensure that your company follows each step and qualifies for loan forgiveness.

You can learn what your company needs to do through the Small Business Administration website, which lists the qualifications you have to meet to be considered for loan forgiveness. It’s important to review them yourself to make sure you understand exactly what you need to do, but a few of the requirements are listed below:

  • The 60/40 rule – at least 60% of your loan funds must have been used to cover payroll. Payroll does not include independent contractors, and your loan forgiveness amount will be partially determined according to the percentage of loan funds you used for payroll.
  • Salary coverage – you must have used the funds to cover at least 75% of your employees’ salaries. If you were not able to do so, your loan forgiveness amount will be affected.
  • Excellent records – you will need proof of the payments you received from the PPP loan, and proof of how you allocated those funds within your company, in order to be eligible for loan forgiveness. You will also need additional records, like tax filings, to show your lender.
  • All requirements are listed on the SBA website above. Review them carefully and speak to your lender about any questions you have.

It’s important to note that the Paycheck Protection Program Flexibility Act, enacted June 5th of this year, changed some of the PPP rules to allow for more flexibility for business owners. Be sure to review these changes as well.

Step 2: Fill Out and Submit the Application

The application for PPP loan forgiveness can also be found on the SBA website. You can fill it out online and turn it in , but you will want to make sure you have all the information it asks for ahead of time. Other websites have also created guides for best practices for filling out the application, which may be useful to refer to as you begin completing the forms. You will need some basic information about your loan – your SBA PPP number, your PPP loan disbursement date, the number of employees you had at the time you received the loan, and the number of employees you have now, are examples of the types of information you will need. Take a look at the application online to see all of the particulars you will need to know and which documents you will need to refer to. If you are unsure of some of the information, consult with your PPP lender to find the details you need.

Step 3: Ask the Experts for Help

If your business has a legal team or accounting department, it would be a wise idea to ask for their guidance as you complete the application. While you need to be an active part of filling out the forms to ensure that all information entered is correct, your legal and accounting experts will be able to check for potential missed details or have additional items to add, along with providing a fresh set of eyes to ensure there are no simple errors, like typos, on your forms.

For answers to some of the more common questions, we also recommend listening to this webinar that the Forsyth County Chamber of Commerce recently hosted, in which a local group of financial experts give you advice on the best ways to maximize your PPP forgiveness amount, along with addressing some frequently asked questions. And while you’re at it, go ahead and take some time to do additional research on your own to ensure that you have done everything you can to meet the requirements for maximum loan forgiveness. A little time spent now could mean a lot of money saved later.

You’re trying to get your business back into the swing of things, and tackling the PPP loan forgiveness application may seem like another burden at the top of an ever-increasing list. But when it comes to keeping your business running successfully, the forgiven loan amount could make a big difference. Set aside some time, gather the information you need, consult with your team, and submit your application so you can go back to doing what you do best – running your business.

July 1, 2020 Laura Stewart