Important PPP forgiveness update as of August 2021
On July 28, 2021, the SBA announced big news (for most PPP borrowers). The SBA has established an online PPP forgiveness platform called the 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.
On December 22, 2020, Congress passed a bill renewing funding under the CARES Act, including an additional $284 billion earmarked for America’s struggling small businesses. The rules and application process for PPP loans and forgiveness have been modified, with more businesses eligible for PPP loans, more expenses forgivable, and a simplified application process.
In this 2-minute read:
- When does the 8-week (or 24-week) coverage period begin?
- How do I maximize forgivable expenses?
- How do I apply for PPP loan forgiveness?
As business owners are receiving there emergency relief funding from the SBA-approved lenders for the Paycheck Protection Program (PPP), one of the biggest concerns is how to make sure this loan gets forgiven.
The PPP loan was originally intended to cover an 8 week period of time to help your business manage payroll costs and other essential business expenses. This has now been revised, and the borrower may elect any covered period between 8 and 24 weeks after the receipt of funds to be the “covered period.” If you adhere to the directives and intent of the loan, spend it on approved PPP expenses, and apply for loan forgiveness, you won’t ever have to pay the loan back!
On June 5, 2020, President Trump signed into law new updates to PPP loan forgiveness requirements, extending the covered period to 24 weeks, and reducing the minimum loan funding that must be spent on payroll to 60%. 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.
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.
- Click here for the full PPP loan forgiveness application
- Click here for the new Form 3508EZ application
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, contact your PPP lender and complete the correct application form.
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.
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When does the coverage period start for PPP loans?
The 8-week (now up to 24 weeks for new PPP loans as of June 5, 2020) period for your loan (and consequently your loan forgiveness), starts at the time when you receive the money from your PPP loan. According to the PPP, once your loan is approved and you receive an E-tran number, your funding should hit your account within 10 calendar days.
During the 8-24 weeks following the receipt of your funds, you must use your PPP loan money for its intended purpose and the requirements set up by the SBA in order to receive loan forgiveness.
That includes using the funds to cover payroll expenses (at least 60% of your loan must go towards payroll costs to achieve full loan forgiveness–this was previously 75% but has been modified as of June 5, 2020) and other essentials like business mortgage, commercial rent, and utilities.
NOTE: for 2021, PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures.
Be sure to keep good records of where this money is spent, because at the end of the 8- to 24-week period, you can request loan forgiveness from your lender.
How can I maximize my forgivable expenses during the coverage period?
You can maximize your forgivable expenses for the PPP loan to help your business keep as much of that money as possible (without having to pay it back).
Your PPP loan can only be used toward expenses incurred during the 8-week (to 24-week) period from the time you receive your loan. While you may not be able to control when your rent and utility bills go out, you can adjust your payroll costs to line up with the timing of your PPP loan.
If you adjust the timing of your payroll date to coincide with your PPP loan funds hitting your account, you can pay the maximum amount of allowable payroll costs during the covered period.
For independent contractors, sole proprietors, and eligible self-employed individuals, you can spend up to 100% of your PPP funding “paying yourself” and still achieve full loan forgiveness. Read full details here: Approved PPP expenses for independent contractors in 2021.
For more details about PPP loans and forgiveness, please read our complete FAQs here.
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