The Definitive Guide to PPP Loan Forgiveness: FAQ and Guidelines

Frequently asked questions about the PPP loans, answered.

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The Paycheck Protection Program — known as the PPP — has processed more than $500 billion in loans to help small businesses survive the economic downturn caused by the coronavirus. One of the most attractive features of the program is the ability to have the loan be forgiven.

However, there are conditions on how they money is spent in order to qualify for loan forgiveness. Read on for more information on how to apply for PPP loan forgiveness, and what are some of the caveats with the program.

Note: If you need more information about the PPP program, read the article to get caught up.

Can PPP loans be forgiven?

Yes — under certain conditions. The Department of the Treasury issued a fact sheet outlining the details.

Loans will be forgiven as long as:

  • The loan was used to cover payroll costs, mortgage, interest, rent, and utility costs over the 8-week period after the loan is paid; and
  • Employee and compensation levels are maintained

What can the PPP loan money be used for?

The loan can be used for:

  • Payroll costs, including salary wages, commissions or tips (capped at $100,000 for each employee)
  • Employee benefits, health premiums and retirement benefits
  • Vacation, parental, family, medical, or sick leave
  • Interest on mortgage incurred before Feb. 15, 2020
  • Rent, under lease agreement before Feb. 15, 2020
  • Utilities, which service began before Feb. 15, 2020
  • State and local taxes assessed on compensation
  • For sole proprietors or independent contractors, wages, commissions, income, or net earnings capped at $100,000

How do I qualify for PPP loan forgiveness?

Once you’ve applied and received a PPP loan, you must send it on approved expenses (see list above).

In addition, the full-time employee head count cannot cannot decline, and employers cannot cut salaries or wages. Employers who laid off workers between Feb. 15 and April 26, 2020 have until June 30 to restaff.

When does the 8-week period begin to determine the amount of the forgiveness?

The 8-week period starts the day you receive the money from your PPP loan. Your lender must make the first disbursement of the loan no later than 2 weeks from the date of the loan approval.

How to apply for PPP loan forgiveness?

Businesses can submit a request to have the loan forgiven with the lender servicing their loan. The request will need to include documentation to verify the number of full-time employees, pay rates, and payments on the mortgage, lease, and utilities.

What paperwork do I need to have my loan forgiven?

Plan to submit the following documentation:

Wages

  • Payroll documentation, including wages, taxes, tips, commissions, healthcare premiums paid, and sick/family leave payments that qualify under the PPP
  • Payroll tax filings, if made
  • Unemployment insurance filings, if any. These can verify if employees came back.

Other expenses

  • Documentation of rent/mortgage and utility bill payments due
  • Check ledgers and/or cancelled checks to verify the payment was made

When will I found out if my loan was forgiven?

The lender will make a decision within 60 days. Loan forgiveness requests will likely begin after the June 30 application due date.

If my loan wasn’t forgiven, how long do I have to pay it back?

All payments are deferred for 6 months, and the loan will be due in full within 2 years. The interest rate is fixed at 1%.

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