If I Elect To Use The Sba’s New Loan Forgiveness Application Will I Be Required To Submit Documentation
The latest guidance from the SBA states for first draw PPP loan forgiveness applications using the S form, documentation does not need to be uploaded, however, you are required to retain all records relating to your PPP loan and may be required to submit such documentation to the SBA, upon request.
For second draw PPP loan forgiveness applications, you may be required to provide revenue reduction documentation if your loan was $150,000 or less and you did not provide such revenue reduction documentation prior to your forgiveness application.
The SBA requires borrowers using Form 3508 and Form 3508EZ to submit documentation in connection with their loan forgiveness application. You will not be eligible to receive loan forgiveness without supporting documentation.
For detailed information on the application, including Covered Periods, the type of costs that are eligible for forgiveness, and what documentation you will need to submit in connection with your application, please visit the U.S. Treasury and SBA websites.
For additional assistance with PPP loan forgiveness documentation, view our documentation guide.
Ppp Loans: What Happens After You Apply
Congratulations! You just finished applying for a Paycheck Protection Program loan. We understand that the waiting period between hitting submit on your application and the day you receive funds can be stressful. You may be feeling anxious, wondering, What is going on with your application?
Wed love to help ease your mind a bit by giving you a peek behind the curtain. We harness the power of technology to make your application process as seamless as possible. That said, once you apply, theres a lot of manual legwork that needs to be done. We assure you that were working around the clock to help you get funded as quickly as possible. If youre wondering why its taking some time to receive a loan decision or loan funds, heres everything that happens after you apply.
You can also find answers to some common questions in the FAQs about the Paycheck Protection Program .
How Does A Change In Ownership Affect My Ppp Loan Or Loan Forgiveness
If you are considering a change of ownership for your business, which could include a merger, asset sale, stock sale or transfer due to the death of a business owner, please notify Wells Fargo as far in advance of the change of ownership transaction as possible. You will need to request prior approval from Wells Fargo before you initiate the change of ownership and provide a copy of the proposed change of ownership agreement and other relevant documents. If you do not obtain prior approval of any change of ownership, it will be considered a default event and may affect your ability to apply for PPP loan forgiveness.
To contact us about a change in ownership if you are a Wells Fargo Business Online® user or a Wealth & Investment Management customer, please call 1-844-304-8911. If you are a Commercial Electronic Office® user, please contact your relationship manager for assistance. We will work with you to complete the process as quickly as possible, but we cannot make any assurances regarding the exact timing for completion of your request, due to the many variables involved.
Providing the requested documentation and responding to questions quickly ensures the best outcome. We anticipate that it will likely take a minimum of 30 days to fully complete the request. The timeframe will depend on our evaluation, your responsiveness during each step of the process, and applicable SBA requirements.
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What Other Funding Options Do You Have
As a loan marketplace, we know the value of having multiple funding options. Luckily, Congress agrees. Under the most recent stimulus bill, they have revitalized funding for Economic Injury and Disaster Loans , the Emergency Economic Injury Grants , and the new Targeted EIDL Advances, with additional provisions to ensure this funding goes to the businesses that have been most affected by the pandemic.
Lendio strives to provide you with the most current information as it relates to the Paycheck Protection Program, related SBA programs, and relevant regulations. The rules and regulations governing these programs are being regularly clarified by the SBA, and other agencies. In some cases, the provided guidance may directly conflict with other competing guidance, laws, rules, or regulations. Due to these changes, Lendio cannot guarantee that the information contained in this page reflects new changes or updates.
Lendio advises you to review the SBA guidelines and regulations on your own and determine your Companys best approach to receiving SBA loans. Lendio urges you to consult your own attorneys, lawyers, and consultants to make the best decision possible. The information contained herein should not be construed as legal or tax advice, and should not be relied upon as such.
Received A Contract But Not Funded Yet
If you have received and signed a contract, but it hasnt been funded, there could be a few reasons. Your application may have errors on the contract, including the wrong name, wrong bank routing number, or incorrect bank account number. Its also possible your application hasnt passed the lenders quality control review.
As financial institutions and fintech providers across the country work diligently to process these loans, we implore applicants to proactively supply as much documentation as possible. We know how badly you and your employees need these relief funds, and we want to help you get funded as expeditiously as possible. Thankfully, money remains in the program and with the recently-passed extension, lenders can continue to push applications across the finish line until the funds are exhausted.
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Whos Eligible To Apply For New Ppp Loans
The new round of PPP loans will be available to three categories of businesses:
Every business that applies for a PPP loan needs to have been in operation since at least February 15, 2020 to be eligible.
First-time PPP borrowers from the following groups are eligible to apply:
- Small businesses or nonprofit organizations with 500 or fewer employees that qualify for other SBA 7 loans.
- Small businesses, 501 veterans organizations, tribal businesses, and small agricultural cooperatives that meet the SBAs size standards.
- Sole proprietors, independent contractors, and self-employed people.
- Food services or hospitality businesses that have fewer than 300 employees per physical location.
Previous PPP loan recipients who meet the following criteria are eligible to apply:
- Have fewer than 300 employees.
- Have already used or will use the full amount of their first PPP loan.
- Can demonstrate a 25% reduction in gross revenue from any quarter in 2020 compared to the same quarter in 2019.
Previous PPP loan recipients who returned all or part of their loan are also eligible to apply .
Whats Different About The Second
The CRRSAA created the opportunity for businesses and nonprofits to apply for a second PPP loan if they meet certain criteria. The second-draw loans are more targeted than first-time PPP loans, and to qualify, businesses must 1) have previously received a PPP loan and used the full amount only for authorized uses 2) have fewer than 300 employees and 3) have had a 25% reduction in gross receipts during at least one quarter of 2020 versus the same quarter of 2019. The maximum loan size for a second PPP loan is $2 million versus $10 million for a first-time PPP loan. Additionally, the SBA has that may be useful.
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What To Do Next
At this time, there is no process for contesting a forgiveness amount. If you want further information on your approval amount, itâs best to reach out to your lender. They can provide details into why the amount may be less than expected.
For the remainder of the loan, you will not have to pay any interest until ten months after the loan hit your bank account.
With no prepayment penalties, you will have an opportunity to pay back the balance of the loan in these ten months so you pay no interest. Otherwise, you can continue using the loan funds in your business and pay it back on the loan terms . If you are going to continue using the loan funds, you will have to continue using it on the outlined expenses .
Can I Submit A Forgiveness Application For A Portion Of My Loan Now And Remainder Later
No, you can only submit one forgiveness application. Our portal allows you to save your progress however, a full application, including required documentation, must be completed and submitted through our digital portal before it can be reviewed. Youâre encouraged to apply as soon as you have collected the required documentation.
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How And Where Can I Check My Ppp Loan Status
Currently the SBA has no facility for borrowers to check the status of their PPP loans. In fact, contacting the SBA is discouraged since it may slow down the process, and you will likely not get a response.
If you applied for your PPP loan via Womply, you can check loan application status at . If you did not apply through Womply, you will need to contact your SBA-approved lender and request a status update.
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How Can I Maximize My Potential Loan Forgiveness
In addition to using your loan funds on eligible expenses, follow the guidance below to maximize your potential loan forgiveness:
- Expenses must be either paid or incurred during your chosen covered period. Your covered period starts on the date of loan disbursement and lasts from 8 to 24 weeks.
- At least 60 percent of the PPP loan proceeds should be spent on payroll expenses and no more than 40 percent of the loan forgiveness amount can be attributable to non-payroll expenses .
- Retain existing full-time equivalent employee levels and maintain at least 75 percent of existing employee compensation levels through the covered period.
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Reasons Why You Might Have Been Rejected For A Ppp Loan
There are several reasons why you might be rejected for a PPP loan: First, you might not meet the qualifications of the program. Second, it might be due to an SBA software issue incorrectly rejecting 2nd time applicants who haven’t had their first loan forgiveness.
Third, it might be because of the lender you applied with had specific rules about when to apply and wasn’t ready for your application . And fourth, it could be because your lender’s internal system flagged your application and send a form reply to you.
What Are The Different Application Forms
The SBA issued several different forgiveness application forms. Below summarizes each form, based on the versions published January 19, 2021.
Form 3508S – For borrowers with loans of $150,000 or less. Benefits include a simplified application and no supporting documentation required in most cases.
Form 3508EZ – For businesses who did not reduce employee compensation by greater than 25% during the covered periods compared to the most recent full calendar quarter before their covered period and also meet one of the following criteria:
- They did not reduce the number of employees or the average hours per employee between January 1, 2020 and the end of the covered period .
- They were unable to operate during the covered period at the same level of business activity as before February 15, 2020, due to compliance with COVID-19 guidance or requirements issued between March 1, 2020 and December 31, 2020 by HHS, CDC, or OSHA including shutdown orders and requirements to operate at reduced capacity from state and local government.
Benefits include:
- Borrowers do not complete the PPP Schedule A or PPP Schedule A Worksheet or equivalent
- Borrowers certify that their forgiveness amount is not subject to potential adjustments due to decreases in FTE and certain employee compensation, so information on those topics is excluded from the application
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Other Relief Available For Small Businesses
Even as vaccinations continue and the U.S. eases restrictions, small businesses are still struggling. There are other relief programs available through the SBA, including some that also give grants to businesses.
The SBA’s Restaurant Revitalization Fund began accepting applications on Monday. The program was established in March as part of the $1.9 trillion stimulus package and was allocated $28.6 billion in funding. In the first 21 days, the SBA will only approve applications from small businesses owned by women, veterans or socially and economically disadvantaged people.
There are worries that the funding won’t be enough to help all the businesses that still need support. In the first two days of the program, 186,200 restaurants, bars and other eligible businesses applied for funding, according to a White House report released Wednesday.
In April, the SBA also reopened applications for the Shuttered Venue Operators Grant Program, which has $16 billion in funding for theater owners and other live venue operators who had to close during the pandemic. The SBA will approve applications in tiers, addressing those with the most revenue loss first.
These programs are especially important for small businesses now that the PPP has been exhausted for most.
He also said Congress or the SBA could decide to forgive some loans given through other programs, such as economic injury disaster loans for small businesses.
Fintech Lenders Have Been Shut Out Of Funding
Fintech, or financial technology, has set up the infrastructure to fund borrowers as quickly as possible. After all, technology controls how quickly borrowers can get funded , and tech companies are obviously going to have the best technology.
Unfortunately, up until this point, the US Treasury has not approved any fintech lenders to fund PPP loans. We expect to see that change soon.
That doesnt mean that you cant apply through a lending marketplace. Lendio has made it simple and quick for small businesses to apply for a PPP loan , and we will pair you with approved SBA lenders. Once fintech lenders are approved, itll give borrowers more options and speedier funding.
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How Long Will It Take The Lender To Fund The Loan
The lender has 10 calendar days to distribute funds, starting on the day the borrower receives an SBA loan number. In accordance with SBA guidelines, the loan must be disbursed in full. The 24-week loan forgiveness period begins on the day the funds are disbursed by the bank.
If a lender is unable to issue funds due to a borrower-caused delay, like missing paperwork, the SBA allows 20 days for funds to be disbursed. If the lender still has not received the necessary information at the end of that 20-day period, the lender is required to cancel the loan.
Work With A Local Bank If Possible
Not everybody banks with a local community bank, but if you do, you will find you are more likely to be able to work with a real person and get more information and better service throughout the process. The larger banks have long lists of businesses and organizations that have applied, and many have stopped taking new applications. You may need to move your business bank accounts to the local community bank to get into their queue, but it may be the difference between getting and not getting PPP money.
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Pay Reduction Beyond The 75% Threshold
Letâs say you have three employees that each made $3,000 per month before COVID-19. Your PPP loan amount was $22,500 . You had to lay them off in February 2020 due to COVID-19. You hired back all three of your employees, but at a reduced salary of $2,000 a month.
Over the 24 weeks of the PPP coverage period, you spend $36,000 on your employees . You claim the full $22,500 of your PPP loan for forgiveness.
When it comes to calculating your forgivable amount, your lender looks at each employeeâs individual compensation. The 75% minimum salary is $2,250 . Youâre paying each person $250 less each month. The $250 difference is scaled up to the 24-week period totalling $1,500. After multiplying this by three employees, $4,500 would be deducted from the forgivable amount. This results in a total of $18,000 forgiven .
A conversation with a bookkeeper can help make sense of your specific situation. This is where Bench comes in. Learn more about who we are and how we can help beyond monthly bookkeeping.
Where Should I Go If I Have Questions
For detailed information on the application, Covered Periods, the type of costs that are eligible for forgiveness and what documentation you will need to submit in connection with your application, please visit the U.S. Treasury and SBA websites.
For additional assistance with PPP loan forgiveness documentation, view our documentation guide.
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When Can I Apply For Ppp Loan Forgiveness
The simplified SBA Form 3508S is now available, in addition to the revised SBA Form 3508EZ and SBA Form 3508 applications. Eligible clients will receive an email with a link to access our loan forgiveness application when it becomes available to them.
As a reminder, based on the latest updates from the SBA, you now have more time to gather your documents and prepare your application. The timeframe for applying for loan forgiveness in the promissory note no longer applies.
For additional assistance with PPP loan forgiveness documentation, view our documentation guide.
