Paycheck Protection Program (PPP) loan forgiveness has been quite popular these days, which lies in its full forgiveness. Essentially, the forgiveness doesn’t fly away, and it’s been just turned into a grant. For small business owners expecting to apply for PPP loan forgiveness of $150,000 online in the right way and at the right time. This article should be read.
What is PPP Loan Forgiveness?
PPP loan forgiveness, short for Paycheck Protection Program loan forgiveness, is a program allowing fund borrowers to be eligible for loan forgiveness if the funds were used for eligible payroll costs, costs of business mortgage interest payments, rent, or utilities during either the 8- or 24-week period after disbursement. A borrower can apply for forgiveness once he has used all loan proceeds for which the borrower is requesting forgiveness. Borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer deferred and borrowers will begin making loan payments to their PPP lender.
Up to now, 3 forgiveness forms are available, including:
How does PPP Loan Forgiveness Work?
In this part, the working process and principles behind PPP loan forgiveness will be generally introduced so that it’s more possible for you to successfully apply for PPP loan forgiveness. The detailed process contains so many details and aspects and only some important ones will be outlined below.
- The PPP loan program is an SBA loan program under the SBA 7(a) program, and was established by the CARES Act which became law on March 27, 2020.
- The PPP Flexibility Act was signed on June 5, 2020, with some provisions changed.
- A new PPP Forgiveness Application and instructions were released on June 16, 2020.
- The Economic Aid Act passed on December 27, 2020, provided more funding to PPP loans and created a second draw loan program with further changes made.
- A new Interim Final Rule was released on January 16, 2021 by the SBA with forgiveness guidelines.
What’s the Basic Premise of PPP Loan Forgiveness?
Generally speaking, the basic premise of PPP is that business owners including the self-employed can apply for a loan of 2.5 times their average monthly payroll. As soon as they are eligible to get the loan, they are required to spend the funds during a specific time on approved items like business mortgage interest payments, rent, or utilities. If all the funds is all spent on approved items and businesses, the borrowers can apply to have the entire amount forgiven.
The basic steps of PPP loan forgiveness running should include:
- Get a PPP loan.
- The loan is spent on approved items within a specific period of time.
- Apply for forgiveness with a lender online.
- The lender has up to 60 days to respond to the request for forgiveness until it goes eligibly forgiven.
- The part balance not forgiven will become a loan at 1% for 5 years.
A Step-by-Step Guide to Apply for PPP Loan Forgiveness
Step 1. Contact your PPP lender and provide the required information.
Your lender will provide you with a PPP loan forgiveness form, either Form 3508, Form 3508EZ, or Form 3508S. As you complete the form, further guidance will be provided by your lender on how to finish it correctly.
Step 2. Complete your payroll.
Your payroll should include the information:
- Bank account statements or third-party payroll service provider reports
- Salary, wages, commissions, or similar compensation
- Payment of cash tips or equivalent
- Tax forms
- Payment for vacation, parental, family, medical, or sick leave
- Allowance for dismissal or separation
- Payment receipts canceled checks, or account statements
- Payment for the provision of employee benefits consisting of group health care or group life, disability, vision, or dental insurance, including insurance premiums, and retirement
Step 3. Submit the forgiveness form.
Now, it’s time to submit your forgiveness form to the lender after you’ve completed the form appropriately and in time.
Step 4. Communicate with your lender through the process and complete the forgiveness application.
If the SBA reviews your loan, your lender will let you know about that. You have the right to appeal certain SBA loan review decisions. Your lender is responsible for notifying you of the forgiveness amount paid by SBA and the date on which your first payment will be due, if applicable.
FAQs for the Application for the PPP Loan Forgiveness
What are FTEs?
Another term you’ll see throughout the application is “FTE,” which stands for Full-time Equivalent or Full-time Equivalency. This is a calculation based on the number of hours an employee works.
Full-time equivalent (FTE) can take into account both full-time and part-time employees. The PPP Forgiveness Application explains how to calculate FTE for PPP loan forgiveness.