What do I need to do to get my Paycheck Protection Program loan forgiven?

In this 3-minute read:

  • What you need to do to get your PPP loan forgiven
  • Required documentation and process for applying for forgiveness
  • How long does it take?
  • What if my request is denied?

The big question on every business owner’s mind as they receive their PPP loans is “How can I make sure this loan is forgiven?” And with good reason! Obviously it’s preferable to not ever have to pay your loan back. The entire point of the Paycheck Protection Program is to help save American jobs and small businesses in crisis, and it was designed to reward appropriate spending of funds with complete or partial forgiveness of the loan (along with a very attractive 1% interest rate). 

We’ve answered some common questions about PPP loan forgiveness in this article and hope that can give you a little more direction in your search for answers. 

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 3, 2020, the Senate passed 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.

What do I need to do to get PPP loan forgiveness?

As you may know, you can have part or even all of your PPP loan’s principal balance forgiven. The first thing you need to do to make this happen is adhere to the requirements of loan forgiveness by only using the funds for eligible PPP expenses. 

Requirements for full or partial PPP loan forgiveness include:

  • Over the 8-week (now 24-week) coverage period following the receipt of your funds, you must use your loan to pay for payroll costs, mortgage interest, and utilities
  • At least 75% (now 60%) of your loan must be used towards payroll costs to achieve full loan forgiveness
  • Technically, your loan forgiveness will be reduced if you decrease your full-time employee headcount. Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019
  • Re-Hiring: You have until December 31, 2020 to restore your full-time employment and salary levels for any changes made after February 15, 2020

If you’ve kept those requirements for the 8 (or 24) weeks after you received your PPP loan, at that point you may apply for loan forgiveness through the lender that serviced your loan. 

In order to request any amount of forgiveness on your loan, you will need to verify that your loan was used for the required expenses, which means you’ll need documented proof. 

What documentation do I need to provide to get my PPP loan forgiven?

You can prepare now by making sure you get the proper documentation in place to present to your lender. 

The documentation you may be required to pass along with your forgiveness request includes the following:

  • Documents to verify the number of full-time equivalent (FTE) employees you have on payroll and their wages
    • Payroll reports from your payroll provider
    • Payroll tax filings
    • Income, payroll, and unemployment insurance filings from your state
    • Documents to verify any health insurance or retirement contributions
  • Documents to verify your eligible mortgage interest, rent, and utility obligations over the 8-week coverage period
    • Canceled checks
    • Payment receipts
    • Account statements

Keep in mind that each lender may have slightly different requirements for documentation. So before the 8-week period for your loan expenses is up, be sure to ask your lender for requirements they have so you can gather everything quickly and submit your forgiveness request as soon as possible. 

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Can I receive partial PPP loan forgiveness?

You can apply for partial loan forgiveness if the entirety of your legitimate business expenses adhere to the requirements for PPP loan forgiveness.

In this case, you provide documentation for the expenses that do qualify for PPP loan forgiveness, and submit your loan forgiveness request via your PPP in the usual way

However, new requirements as of June 3, 2020 mean that at least 60% of your PPP funding must go toward payroll expenses or NONE of the loan will be forgivable. See “important update” above.

Any amount of your loan that doesn’t qualify for loan forgiveness under the PPP will need to be repaid within 2 years (now 5 years) at 1% interest, with payments deferred until the SBA approves your application for loan forgiveness, or 10 months after the end of your covered period. (Note, interest still accrues during the grace period)

How long will it take to know if my request for PPP loan forgiveness is approved?

You won’t be able to submit a request for loan forgiveness until 8 weeks (or 24 weeks, if you applied for your PPP loan after June 3, 2020) after you receive your PPP loan (the “covered period”). After you submit your request, your lender will have 60 days to review the application and make a decision. 

What if I don’t get approved for PPP loan forgiveness?

If your request for loan forgiveness is denied, you can appeal the decision with your lender. At that point, they may require you to provide additional documentation to support your claims. 

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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