Is PPP loan forgiveness automatic? Or do I have to do something?

In this 2-minute read:

  • Are PPP loans automatically forgiven?
  • What do I need to do to have my Paycheck Protection Program loan forgiven?

As business owners start receiving their PPP loans or continue to apply for theirs, there are several pressing questions about PPP loan forgiveness. Will your PPP loans automatically be forgiven if you adhere to all of the requirements for loan forgiveness?

NEW PPP FORGIVENESS UPDATE AS OF JUNE 17, 2020

The Treasury released a new IFR and an “easy” version of the PPP loan forgiveness application on June 17, 2020. Please read the full details here.

Here’s how borrowers decide which forgiveness application to use. You may use Form 3508EZ if:

  • You are self-employed and have no employees; OR
  • You did not reduce the salaries or wages of employees by more than 25%, and did not reduce the number or hours of employees; OR
  • You experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of employees by more than 25%.

If you don’t fit into any of the above conditions, you will need to complete and submit the full PPP loan forgiveness application.

IMPORTANT UPDATE: On June 5, 2020, President Trump signed into law new updates to PPP loan forgiveness requirements, extending the covered period to 24 weeks, reducing the minimum loan funding that must be spent on payroll to 60%, and easing the requirements for maintaining staffing and compensation levels. Please read the details here.

NOTE: On Wednesday, May 13, 2020, the SBA released revisions to their FAQs regarding PPP loan forgiveness. Read the details here

Womply has partnered with various trusted lenders to offer you the best possible rates on small business funding. Whether you need a term loan, a line of credit, or another type of small business capital, we can help! Click here to learn more.

Is forgiveness of PPP loans automatic?

In short, Paycheck Protection Program loan forgiveness is not automatic. You must submit a request to for loan forgiveness through the lender through which you applied for your PPP loan. 

Remember, in order to have your PPP loan fully forgiven, at least 75% (now 60%) of those funds must be used to maintain payroll costs and employment. Other eligible expenses for loan forgiveness include commercial rent, interest on your business mortgage, and utilities. 

How do I request PPP loan forgiveness?

As mentioned, in order to have your PPP loan forgiven, you need to submit a formal request through the lender that processed your application and serviced your loan. You’ll need to gather and submit documentation to verify the following items: 

  • Number of full-time employees and their pay rates
  • Payments on eligible business mortgage, rent, and/or utility obligations
  • The amount of the loan being forgiven that was used to cover the above expenses

You must be able to certify that all of the documentation is true and that your loan forgiveness amount meets the requirements. 

You won’t be able to apply for loan forgiveness until the 8-week (or 24-week; see “important update” above) period of the loan coverage has ended. At that point, your lender will have 60 days to make a decision on your request. 

Is it all or nothing? Can I receive partial PPP loan forgiveness?

You can receive partial loan forgiveness if all of your legitimate business expenses or payroll don’t adhere to the requirements for PPP loan forgiveness.

You simply document which portions of your expenses do qualify for PPP loan forgiveness, and submit your request for loan forgiveness via your PPP lender within the time limit for loan forgiveness request submissions. 

UPDATE: New legislation as of June 5, 2020 reduces the payroll spending requirement to 60% in order to achieve full loan forgiveness. Please see “important update” above.

The portion of your loan that doesn’t qualify for loan forgiveness will need to be repaid under the terms of the PPP loan program, at 1% interest, with payments deferred for up to 10 months after the end of your covered period (previously 6 months) and the loan due after 2 years (now 5 years). (Note, interest still accrues during the grace period).

Womply can help you get the small business funding that’s right for you

Womply has partnered with various trusted lenders to offer you the best possible rates on small business funding. Whether you need a term loan, a line of credit, or another type of small business capital, we can help!

Click here to check out our small business loans resources, or schedule a free, personalized demo of Womply’s small business apps to learn more!

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