Ppp Application Deadline Extended
President Biden has signed the PPP Extension Act of 2021. The new law extends the Paycheck Protection Program application filing deadline from March 31, 2021, to May 31, 2021, thus providing potential PPP borrowers additional time to submit their applications. The law doesnt provide the PPP with any additional funding. However, $7.25 billion in additional funding was recently provided in the American Rescue Plan Act.
PPP basics
The PPP was established in March 2020 by the CARES Act. The program was designed to help small employers meet their payrolls during the economic crisis caused by the COVID-19 pandemic. PPP loans are available to virtually every U.S. business with fewer than 500 employees that was affected by COVID-19, including sole proprietors, self-employed individuals, independent contractors and nonprofits.
PPP loans generally are 100% forgivable if the borrower allocates the funds on a 60/40 basis between payroll and eligible nonpayroll costs. Nonpayroll costs originally were limited to mortgage interest, rent, utilities and interest on any other existing debt, but the Consolidated Appropriations Act , enacted in late 2020, significantly expanded the eligible nonpayroll costs. For example, borrowers now can apply the funds to cover certain operating expenses and worker protection expenses.
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Third Round Ppp Funding Was Offered To Help Employees And Keep Businesses Afloat
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The Consolidated Appropriations Act, 2021 , signed into law by President Donald Trump on Dec. 27, 2020, included new funding for the Paycheck Protection Program , which expired Aug. 8, 2020.
The PPP was a U.S. loan program established to help small businesses affected by the economic slowdown associated with the COVID pandemic to pay the wages of employees and certain other expenses. It was created by the CARES Act and originally included $349 billion in funding. However, that money was gone within two weeks, resulting in the second round of funding totaling $310 billion.
Are Ppp Loans Eligible For Loan Forgiveness
PPP loans, in whole or in part, are eligible for loan forgiveness if funds were used for certain eligible business expenses. However, if you pay off your loan in full before you apply for forgiveness, you are no longer eligible for loan forgiveness. If part of the loan is not forgiven, you will be responsible to repay the amount not forgiven plus any accrued interest.
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First Round Ppp Borrowers: File For Loan Forgiveness Before Its Too Late
Business owners that took out a first-round Paycheck Protection Program loan that had a 24-week covered period should consider applying for loan forgiveness and soon. If not, the loan may become permanent and you will be held responsible for loan payments and interest. Heres what you need to know about applying for loan forgiveness so you can avoid these unnecessary costs.
If a PPP loan borrower doesnt apply for forgiveness with the U.S. Small Business Administration within 10 months of the end of the covered timeframe in which they had to spend the loan proceeds, the loan will automatically change into a standard loan at 1% interest. The program launched in April 2020 with some of the first borrowers having an eight-week covered period, then the popular 24-week covered period was introduced. Borrowers operating under the eight-week option had a loan forgiveness application deadline this past July, while those who selected the popular 24-week option still have until September to apply and prevent the loan from converting.
Doeren Mayhews PPP advisors highly recommend those with the 24-week covered period to apply for loan forgiveness as soon as possible it would be unfortunate for a small business to miss out on an opportunity to have their loan forgiven just because they were unaware of their deadline. If your business is ready to file for loan forgiveness and needs assistance with its application, contact our PPP advisors today.
What Is The January/february Period Ive Heard Referenced
The CARES Act became law March 27, 2020 and in the first round of PPP, self employed business owners did not get instructions on how to calculate payroll right away. When the guidance did come out, it did not include instructions for businesses that werent in business in 2019 but were in business by the deadline of February 15, 2020 required to qualify.
Later the SBA provided instructions for businesses that were not in business in 2019 but were in business in January and February 2020. Those instructions generally allowed those businesses to calculate their loan amount using their average monthly payroll costs incurred in January and February 2020. This calculation is still an option, or the business may use all of 2019 or all of 2020 to qualify. For details on how to calculate the January/February option, see the SBA guidance dated January 17, 2021: Questions 10 & 11.
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Paycheck Protection Program : 5 Faqs
Did you receive PPP funding? Wondering when your deadline is to pay? What if you cannot make the payment on time? We have the answers to these questions and more. Read on.
As featured in Providence Business News, we caught up with Mike Garcia to hear his thoughts on five FAQs regarding the Paycheck Protection Program . Lets dive in.
Questions? Visit our PPP Headquarters and contact us at any time.
Are Your Ppp Loans Forgiven
Although it is too late to take out a Paycheck Protection Program loan, now is the time to apply to have your loan forgiven.
The process to receive a refund on your PPP loan is outlined here on the Small Business Administration website. SBA has launched a streamlined application portal for borrowers with loans of $150,000 or less, and you can read more details in this NAHBNow post.
Borrowers who need assistance or have questions should call 877-552-2692, MondayFriday, 8 a.m.-8 p.m. ET.
Loans to HBAs can be forgiven as well, thanks to NAHB’s efforts in working with Congress to include 501 organizations as being eligible to receive PPP funding. Just as with any other business that received PPP loans, these loans can be forgiven if used for payroll, rent/mortgage, utilities and other qualifying expenses.
Some key points to note on the PPP loan forgiveness:
If you have trouble with either process, let NAHB know by contacting .
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What If My Business Showed A Loss
Prior to the March 3, 2021 change, if you were self-employed and did not have employees, your business must have showed a net profit on either your 2019 or 2020 Schedule C to qualify for PPP. Now your business must show gross income or a net profit to qualify. Self-employed individuals with employees may also qualify based on payroll plus owners compensation using the methods described above. More businesses are likely to qualify for PPP using the new calculation.
What Businesses Are Eligible For Second
The second-draw PPPs purpose is to offer financial assistance to businesses that were hit especially hard by COVID-19 disruptions. Ultimately, this means the second-draw loans are much more targeted. To qualify, companies must meet the following criteria:
- The business must have previously received a PPP loan and used the full amount only for authorized uses.
- The business must have fewer than 300 employees.
- The business will need to show it had a 25% reduction in gross receipts during at least one quarter of 2020 versus the same quarter of 2019.
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There May Be More Time To Apply For Second Draw Loans
The additional two months may also open the door for small businesses that got a first PPP loan this year to apply for a second one.
Some small businesses that recently got a first draw previously didnt have enough time to apply for a second one, as generally eight weeks must pass between the loans so theres time to spend the money on payroll.
This mostly impacted sole proprietors that didnt know they qualified for assistance through the program or werent able to get funding in the previous round.
Theyre certainly going to be a big beneficiary of this added time on the application process, said Patrick Ryan, president and CEO of First Bank.
Of course, there are extra qualifications for a second draw loan beyond the eight-week time period. Small businesses must have no more than 300 employees and be able to show at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020, according to the SBA.
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Ppp Loan Forgiveness Application Deadlines Are Looming
If you were one of the nearly 12 million employers who benefitted from a PPP loan during the height of economic uncertainty brought on by the COVID-19 pandemic, there is a very important upcoming deadline you will want to keep on your radar. If you havent already done so, you should be preparing to apply for PPP loan forgiveness for the 1st draw PPP loan that you received in 2020. It is important to start the process prior to the actual deadline so that you can plan for any unanticipated repayment requirements in case you determine some or all of your loan is not eligible for forgiveness.
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More Sba Guidance Likely
To be sure, questions remain about the program, and the additional time could open the door for further guidance from the SBA.
For one, sole proprietors that applied for loans before the updated calculation was announced are pushing for the rules to be retroactively applied. The difference in loan amounts would have meant thousands of dollars more in forgivable funding for some.
“It shouldn’t be to the detriment of those that were diligent and got their applications in early,” said Keith Hall, president and CEO of the National Association for the Self-Employed.
Lenders have also questioned the eight-week timeframe between first and second draw loans for sole proprietors, who don’t have traditional payrolls. Because of this, some argue that they shouldn’t have to wait eight weeks to apply for a second loan.
” will give the SBA enough time to do the right thing on a number of these issues,” said Hurn.
First Draw Ppp Loan If You Have No Employees
If you are self-employed and have no employees, the SBA provides the following instructions in the March 3, 2021 for new PPP loan borrowers:
If you have no employees, use the following methodology to calculate your maximum loan amount:
Step 1: From your 2019 or 2020 IRS Form 1040, Schedule C, you may elect to use either your line 31 net profit amount or your line 7 gross income amount. If this amount is over $100,000, reduce it to $100,000. If both your net profit and gross income are zero or less, you are not eligible for a PPP loan.
Step 2: Calculate the average monthly net profit or gross income amount .
Step 3: Multiply the average monthly net profit or gross income amount from Step 2 by 2.5. This amount cannot exceed $20,833.
This is the amount most self employed borrowers with no employees will use to qualify for a first-time PPP loan.
How to Substantiate Your Income
You must provide the 2019 or 2020 Form 1040 Schedule C with your PPP loan application to substantiate the amount for which you applied. You must also include a 2019 or 2020 IRS Form 1099-MISC detailing non-employee compensation received , invoice, bank statement, or book of record that establishes you are self-employed. If using 2020 to calculate loan amount, this is required regardless of whether you have filed a 2020 tax return with the IRS. You must provide a 2020 invoice, bank statement, or book of record to establish you were in operation on or around February 15, 2020.
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It Is Not Too Late To Get A Ppp Loan
The Small Business Administration just announced that there are still funds available for PPP loans. As the law is currently written, PPP loans may be available only until June 30, 2020. All qualified businesses, including independent contractors and sole proprietors should consider applying for a PPP loan.
Many banks are no longer accepting PPP loan applications. The Small Business Administration has provided us list of lenders that are still offering the loans. The lenders are:
- Advantage Capital
SBA will also will have virtual office hours to answer questions about the PPP loans. Participants can call in at:
Tuesday – Friday, 3pm 4pm
202-765-1264 Conference ID 334 550 292
Are Health Care And Retirement Benefits Paid By The Employer Eligible Costs For Loan Forgiveness
For employees
Health care and retirement benefits paid or incurred during the covered period are eligible for forgiveness as payroll costs. Expenses paid by employees for such benefits are not eligible for forgiveness. Expenses for future periods that are accelerated into the covered period are also not eligible for forgiveness.
For self-employed individuals and general partners
Employer health insurance contributions and employer retirement contributions made on behalf of self-employed individuals or general partners are not eligible expenses.
For owner-employees of S-corps
Employer health insurance contributions are not included for owners having at least a 2% stake of an S-corp. Employer retirement contributions made on behalf of an owner-employee of an S-corp are eligible and do not count toward the cash compensation cap of $20,833 per individual, and are capped at the amount of 2.5x their monthly employer retirement contribution in the year that was used to calculate the loan amount .
For owner-employees of C-corps
Employer health insurance contributions and retirement contributions are eligible expenses. Retirement costs are capped at 2.5 x monthly employer retirement contribution in the year that was used to calculate the loan amount . These payments do not count toward the $20,833 cap per individual.
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What Documents Are Needed For Ppp Forgiveness
Documentation requirements for PPP loan forgiveness can be weighty. Requirements vary depending on which forms you use and how you calculate your loan-related expenses. The three PPP loan forgiveness application forms are:
SBA Form 3508: This is the standard PPP loan forgiveness application.
SBA Form 3508EZ: This simplified version of the standard form requires less documentation. To choose SBA Form 3508EZ, you must have a loan of $150,000 or more and meet one of two sets of criteria:
- No reductions: You did not reduce your number of employees, the average paid hours of your employees, or the salary or wages of your employees by more than 25% between January 1, 2020, and the end of your covered period.
- Impacted operations: You were unable to operate normally during the covered period to comply with federal guidelines from the Department of Health and Human Services, Centers for Disease Control or Occupational Safety and Health Administration.
SBA Form 3508S: The simplest version of SBA Form 3508 is for borrowers with loans of $150,000 or less.
Each of these forms requires a fair amount of calculation. Unless you’re using SBA Form 3508S, which doesn’t require documentation, you’ll also need to back up your calculations with documents, including:
Payroll :
Non-payroll :
Receipts, orders and purchase orders, canceled checks or account statements for the following:
- Business mortgage interest payments
- Business rent or lease payments
- Business utility payments
What Business Expenses Qualify For Loan Forgiveness
To be eligible for loan forgiveness, the funds must be used for eligible costs incurred or paid during the covered period. You can choose a covered period of any length between 8-weeks and 24-weeks , beginning on the date you received the loan proceeds.
Cost include:
- Eligible payroll costs, including compensation to owners and employee benefits
- Interest payments on business mortgage obligations on real or personal property, where the mortgage originated before February 15, 2020,
- Business rent or lease payments for real or personal property, where the rent or lease agreement was in force before February 15, 2020
- Business utility payments for a service such as electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020
Additional eligible costs were added as part of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, signed into law on December 27, 2020. These eligible costs are retroactive to any previous unforgiven PPP loans and include:
At least 60% of your total forgivable amount must be used for allowable payroll costs.
Refer to the SBA for a full list of eligible costs that can be forgiven under a PPP loan.
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