Filing For PPP Loan Forgiveness
Now that things are rebounding after the pandemic, business owners who took out Paycheck Protection Program (PPP) loans are looking for forgiveness on the debt. The Paycheck Protection Program was a federal loan designed to help small businesses keep their employees on the payroll during the COVID-19 pandemic.
This once-in-a-lifetime pandemic brought changes to business owners, and the intention of the PPP loan was to help stabilize operations during uncertainty.
Business owners who took out these loans may wonder if they qualify for loan forgiveness and how to apply.
Who Qualifies For PPP Loan Forgiveness?
To qualify for PPP loan forgiveness, companies who took them had to use the loan for employee payroll and other qualifying expenses. Borrowers must have spent at least 60% of the loan on payroll costs. The remaining 40% was eligible for use on rent, mortgage interest, or utility payments.
For forgiveness, the following conditions must apply:
- Employees must stay on the payroll for eight weeks after loan origination.
- Each employee’s salary during those eight weeks cannot be more than $100,000 annually.
- Owner-employees and self-employed individuals who receive loans may have limitations on their salaries included in the forgiveness calculation.
If you’re a business owner who kept employees on your payroll or used the loan for qualifying expenses, you may be eligible for PPP loan forgiveness. Forgiveness is not automatic.
What Is The Process Of Filing For PPP Loan Forgiveness?
To apply for forgiveness, borrowers must submit a request to their lender. The Small Business Administration (SBA) has created a Loan Forgiveness Application that borrowers can use. In addition, borrowers must provide documentation supporting their loan forgiveness requests, such as bank statements and payroll reports.
The SBA will review the application and supporting documentation and determine loan forgiveness. If the SBA approves the request, they will notify the borrower’s lender, and the loan gets forgiven.
If the SBA denies the request, they will notify the borrower’s lender. The borrower then has the opportunity to appeal the decision. During the appeal process, the borrower and lender will work together to gather additional documentation to support the forgiveness request.
What Happens If My PPP Loan Does Not Get Forgiven?
If a PPP does not get forgiven, you will be responsible for repaying the loan. The loan has a maturity date of two years from the date of loan origination. After that, the interest rate is 1%. If you choose deferred payments, interest accrues during the deferment period.
How Can A CPA Help With This Issue?
If you’re a company owner who received a PPP loan, you may be feeling overwhelmed by the process of applying for forgiveness. A certified public accountant (CPA) can help. From sorting through documentation to preparing your forgiveness application, a CPA can help you navigate the process, helping to increase the chances for loan forgiveness.
When it comes to something as important as your business’s finances, it’s always best to seek professional help. The tax professionals at Morgan & Morgan, P.C. can help you with your PPP loan forgiveness application. We know how to help you handle this crucial business matter.