In this 5-minute read:
- Is my PPP loan likely to be forgiven?
- Do I need to open a separate bank account for my PPP loan?
- When can I apply for loan forgiveness?
- Which application do I need to use for loan forgiveness?
- What do I need to submit with my loan forgiveness application?
- When should I know if my forgiveness application has been accepted?
- What happens if I have to pay the PPP loan back?
The PPP loan isn’t a program to jump into without having a little information up front about how the process works. This program has provided forgivable funding to small businesses that are facing financial hardship amidst the challenges of COVID-19. It’s very likely that your small business is eligible for this funding (if there is federal money available currently), but as you navigate through this program, you’ll want to ask some questions along the way to make sure you understand how everything works—and to give yourself the best chance at getting full loan forgiveness.
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Is my PPP loan likely to be forgiven?
You want to ask this right from the start (after your lender has enough information about your business to give you a solid answer). A big appeal of the PPP loan is that it can be fully forgiven if you follow the rules, so you’ll want to make sure you can qualify for that loan forgiveness before you apply. That’s not to say that you shouldn’t apply (when PPP funding is available) even if you aren’t likely to receive full forgiveness, because it’s still a better business loan (at 1% APR) than anyone is likely to get from a traditional lender.
Your lender should already have experience processing loan forgiveness applications and seeing which of their clients have received full loan forgiveness. So they should have a good idea of whether or not you are likely to receive full loan forgiveness.
That being said, most companies that receive the loan will receive loan forgiveness so long as they follow the rules for how to spend their PPP funds.
Do I need to open a separate bank account for my PPP loan?
Opening a separate bank account for your PPP loan can be helpful for tracking your funds easier. Talk to your lender about this to see what the best option is for your business. If your PPP loan lender is with a different bank from your regular business bank account, then you will likely need to open up a new account with that new lender.
When can I apply for PPP loan forgiveness?
To apply for loan forgiveness, you should first check if your lender has opted-in to the new SBA PPP Direct Forgiveness Portal. If your PPP loan was for $150,000 or less, AND if your lender has opted-in to the use of the platform, you will be able to submit your PPP loan forgiveness application online directly to the SBA, using the electronic equivalent of SBA Form 3508S. For full details, read our post about the new SBA PPP Direct Forgiveness Portal and other recent rule changes.
If the above doesn’t apply to you, you will need to apply for loan forgiveness through the lender that processed your PPP loan. You should be able to apply for your forgiveness as soon as your covered loan period ends, and you’ll have 10 months from that date to apply.
One thing that you could ask your lender to do is send you a notification or email when your covered loan period is up as a reminder to submit your forgiveness application. Many lenders will have some kind of process set up here to keep you informed throughout the process of your PPP loan, and this kind of message can help you stay on top of getting your loan forgiven.
Which application do I need to use for loan forgiveness?
There are currently three different applications for PPP loan forgiveness. The one you need to use will depend on your loan amount and what type of business you run. Your lender should know which forgiveness application you’ll need and they should send that to you at the end of your covered loan period so you can apply.
- Check out our instruction guide: PPP forgiveness application instructions for loans over $150,000 (forms 3508 and 3508EZ)
- See our instruction guide for PPP loan forgiveness Form 3508S (loans under $150K)
If they haven’t sent you the application or don’t mention this during your initial conversations, ask them if that’s something that they plan to do. It’s helpful to have a lender who is on top of this and sends you your application as a reminder that it’s time to apply for loan forgiveness. When you’re in the daily busyness of running your operations this can be something that is easy to forget, but if you have a lender that sends you notifications and stays on top of this, that’ll make the process go much smoother.
What do I need to submit with my loan forgiveness application?
In some instances, you may need to submit additional documentation with your forgiveness application to verify how you spent your PPP loan funds. This might include bank statements, lease agreements, invoices, cancelled checks, or other tax documentation.
Whatever you need to include, your lender should be able to tell you which documents to submit to help verify your forgiveness application.
Read more about what documentation you need for PPP forgiveness in our PPP Forgiveness FAQ.
When should I know if my forgiveness application has been accepted?
After more than a year of processing PPP loans and their forgiveness applications, your lender should have a pretty good idea of the timing for a decision to be made on your loan forgiveness. There likely won’t be an exact date or time of reference that they can give you, but they should be able to ballpark a timeline based on the previous applications they’ve processed.
That being said, if you don’t hear from them within a week or two after you’ve applied for your loan forgiveness, then just reach out to them. Send an email or give a quick phone call to check on the status of your application. They should be able to tell you if it’s at least being processed with the SBA. Rest assured that once a decision has been made, it is your lender’s responsibility to inform you of that decision. So one way or another, you should hear from them.
What happens if I have to pay the PPP loan back?
If you have to pay any portion of your PPP loan back, this will be done through your lender. Ask them about that process and what to expect. You’ll be responsible for paying back any amount of your loan that isn’t forgiven, plus any interest that has accrued on it.
Depending on when you received your PPP loan, you may have either 2 or 5 years to pay this back. The interest rate is 1% APR, so even if you need to pay back a portion of your loan, that’s still a fantastic deal in the world of business loans.
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